The Federal Reserve is closing ranks around the goal of rapidly raising its benchmark interest rate.
The Fed's strategy is data-sensitive, but officials have made it clear that much more will have to be done to get them off the path of 4.5%: Policymakers push back during the week against investor bets on recession. Risks or even volatility of the financial market can stop. them.
The Federal Reserve is closing ranks around its target of raising its benchmark interest rate to around 4.5%, then holding it there, while poised to move higher if inflation fails to show signs of moderating. being done.
The objective, which is widely shared among 19 policymakers at the US central bank, suggests they are set to deliver a fourth straight 75-basis-point rate hike next month. The impact of OPEC oil output cuts on energy prices and a strong September jobs report strengthened the case, which could be further boosted by the latest inflation data on October 13.
Chicago Federal Reserve Bank President Charles Evans, traditionally one of the more modest members of the central bank, told business leaders on October 6, "We look at 4.5% to 4.75% sometime next year, according to our report. Huh." The current target range for the Fed's benchmark rate is 3% to 3.25%.
The Fed's strategy is data-sensitive, but officials have made it clear that it will take a long time to push them on the way to 4.5%: policy maker after policy maker pushed back during the week against investors' bets that a recession could be taking place. The risk or volatility of the financial market can also deter them.
"As long as we see any signs of inflation starting to subside, I don't know how we stop," Fed Governor Christopher Waller said on October 6 at the University of Kentucky.
While there is optimism that the case for lower inflation is starting to emerge, there is also a sentiment that this war the Fed cannot lose – even at the risk of a recession in the economy.
Forecasts for September six from officials show that they expect rates to rise in the range of 4.75% to 5% next year, a view that will likely gain traction if price pressures are not as hoped.
The continuation of the underlying inflation pressures outlined by Governors Lisa Cook, Waller and Evans and New York Fed Chairman John Williams has been a growing concern.
"Reports over the past few months have shown high inflation to be persistent," Cook said in his first speech as governor. "I have revised my assessment of the continuation of high inflation," he said. Vote for load policy.
Prices rose 6.2% for the year ending August, above their 2% target for the 18th consecutive month of annual inflation, while US employers added 263,000 people to the payroll in September, a sign that underlying demand. remains strong.
"If you don't reduce inflation, people start building up these inflation numbers in their daily lives," Waller said in response to a question after his Kentucky speech, and "all hell breaks loose."
There are scattered signs that point to the possibility of a recession-free win over inflation. Prices of non-energy goods have plummeted, as have job vacancies, while the pace of production in the country's factories is slowing. Retailers have stocked up on inventory and will have to move them in the coming months with price cuts.
Still, Fed officials are reluctant to bet on the forecast. Many have said that they will have to see successive months of inflation moving towards 2% before any discussion of policy easing can take place.
"I would see the need for more policy adjustments to adequately contain the economy," San Francisco Fed Chair Mary Daly said in an October 5 interview with Bloomberg News. And then keeping it there until we get inflation really close to 2%."
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