The US Federal Reserve is expecting a 'soft landing' for the US economy. The central bank is examining the right level of interest rate to combat inflation without affecting employment.
The prospect of a "soft landing" for the US economy is growing, Federal Reserve Vice Chair Lael Brainard said Thursday, and the central bank is "probing" for the right level of interest rates to control inflation without reducing employment. doing.
"Inflation has been declining for the past several months against a backdrop of moderate growth," Brainard said at the University of Chicago's Booth School of Business, noting significant weakness in the manufacturing sector, slowing consumer spending and other data. . Pointing to "slow growth" in 2023.
The slowdown is, for the most part, welcome. The Fed last year raised its benchmark overnight interest rate sharply from near zero in March to the current 4.25%-4.50% range to control inflation climbing to a 40-year high.
Brainard said the aggressive policy tightening is beginning to slow demand, but the full impact is yet to come.
"We're in restrictive territory now, and we're testing to a sufficiently restrictive level" to be confident that inflation is going back up to the Fed's 2% target, Brainard said.
Brainard's remarks, one of the last from a Fed policymaker before Saturday's start of an official quiet period ahead of the central bank's next rate-setting meeting on Jan. 31-Feb. 1, gave no clear guidance on where they think interest rates may eventually need to go.
In December, Fed policymakers as a group indicated that the policy rate would need to be raised to at least 5.1%; Financial markets are pricing in less than 5% for the Fed.
But Brainard showed a quarter of a percentage-point, a decline from December's half-point rate hike and four prior 75-basis-point rate hikes, to confirm market expectations for the Fed's upcoming rate hike.
The "logic" that prompted the Fed to slow its rate-hike pace in December to allow more time to assess the impact of policy "is very much applicable today," Brainard said.
In separate comments Thursday, New York Fed leader John Williams said he was not ready to forecast the outcome of the upcoming Fed meeting, but in comments calling for more rate hikes, he added a quarter percentage point to the market. Don't back down on expectations. Growth.
"With inflation still high and signs of a continuing supply-demand imbalance, it is clear that monetary policy still needs more to bring inflation down to our 2% target on a sustained basis," Williams said in a speech on fixed income. Have to work." New York Analysts Society.
"Bringing down inflation may require an extension of the downward trend and some softening of labor market conditions," Williams warned. Restoring price stability is essential to achieving maximum employment and stable prices over the long term, and it is vital that we stay at it until the job is done."
'competition' risk
Earlier Thursday, Boston Fed President Susan Collins was more forthright.
"I anticipate the need for further rate hikes, most likely above 5%, and then keeping rates at that level for some time," Collins told a conference call hosted by the Boston Fed. " Establishment of allies in recent weeks.
She also said she thinks small rate hikes are now appropriate as the Fed manages "competing" threats: "the risk that our actions may be insufficient to restore price stability, versus the risk that our actions may be insufficient to restore price stability." may result in unnecessary loss of genuine activity and employment."
Brainard similarly, though less directly, calls a potential risk to the labor market as rates increasingly constrict the economy, a change from last year when fighting inflation was the Fed's clearest priority.
"We are now in an environment where we are balancing the risks on both sides," she said.
She also pointed to trends in prices, wages and margins that indicate inflation, which has been running at about three times its 2% target by the Fed's preferred measure, was slowing and may well continue to do so. Could
Meanwhile, the US unemployment rate is at a low 3.5%.
"Recent data suggest somewhat better prospects that we may see continued deflation in the context of moderate growth," Brainard said. Still, she said, "it's a very uncertain environment and you can't rule out worse trade-offs."
As the Fed analyzed the progress made on inflation, it said it would "stay the course."
"Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to ensure inflation remains at 2% on an ongoing basis," Brainard said.
No comments:
Post a Comment