The Federal Reserve has hiked rates five times this year in an attempt to stem the worst inflation in 40 years, the past three being particularly rapid. This has led Wall Street and policy makers to ponder when the Fed will start to slow down.
Fed Chairman Jerome H. Powell has suggested a more gradual move would be appropriate at some point in the future, but did not give a date for when that would begin.Central bank statements and economic forecasts Based on that, the market is betting big that it won’t slow down until December. But this week, at least one of his Fed governors suggested a slowdown could be justified at his Fed’s next meeting in November.
San Francisco Federal Reserve Governor Mary C. Daly said she could endorse a 0.5-point move at next month’s central bank meeting. Not as aggressive as the 3/4 point change the Fed made at its meeting.
Daley has been less aggressive than most lawmakers, favoring another 1% rate hike by the end of the year.
“I don’t think we need to signal that we’re resolute anymore,” Daley said in an interview with The New York Times this week. This data helps me decide if I’m in favor of 75 followed by 25 or 50 followed by 50.”
Inflation FAQ
What is inflation? Inflation is the loss of purchasing power over time. So your dollar won’t go as well tomorrow as it did today. This is usually expressed as annual fluctuations in the prices of commodities and services such as food, furniture, clothing, transportation, and toys.
Between now and the Fed’s next meeting on November 1-2, there’s a lot of data to come. The Fed will receive a new jobs report on Friday and new consumer price index data next week. Indicators of economic strength, including housing market information and retail data, also provide a window into whether growth is losing momentum in a way that price gains could slow.
And Daly’s tolerance for an early slowdown isn’t necessarily poised to become the Fed’s consensus. She is one of her 19 people to discuss monetary policy at every central bank meeting and does not have a vote on monetary policy this year.
Some of her colleagues have suggested another big move would be appropriate in November unless data show a marked improvement in inflation. expressed its opinionfor example.
“Inflation is still too high. To bring inflation down quickly, we need to move the policy stance into restrictive territory,” Bostic said Wednesday. Still, “if forthcoming data clearly show that inflation is starting to slow, it may be a reason to hold back on the 75-basis-point increase that the Commission implemented at its most recent meeting,” he added.
Bostic said this week that the policy rate will rise to 4% to 4.5% by the end of the year.
And Richmond Federal Reserve Bank Governor Thomas Birkin said in an interview that while he has yet to decide what size moves are appropriate for November, investors risk getting too caught up in individual data points.
He said the situation hadn’t changed much since the Fed’s meeting in September: inflation was stubborn and widespread, supply chains were slow to recover and workers were still in short supply. The trajectory of , he said, is still “jumbled.”
Whether the Fed can achieve a soft landing is “not the question I’m focusing on. The question I’m focusing on is whether there’s a way to get inflation back on target,” Birkin said. Said. “Of course, doing it with minimal stress is a priority. But I think the goal is to keep inflation down.”
Understanding Inflation and How It Affects You
The market is still betting big on a bigger move in November. based on priceAfter that, we expect the Fed to slow rate hikes to 0.5 percentage points in December.
But there are different stages of monetary tightening, and the current stage is likely to be more variable. Earlier this year, central banks attempted to raise interest rates from very low levels, but policymakers now believe they are crossing the line between policies that help the economy and those that hurt it. This is known as the “neutral” interest rate.
Fed officials are weighing more on upcoming data and making decisions on a meeting-by-meeting basis as every move is a step to further constrain the economy. Once it has fully taken hold, you may find yourself overdoing it months or years later.
Until recently, central banks tried to tackle other problems. After Chairman Powell’s press conference in July, the market significantly lowered expectations of the Fed’s actions.
The central bank has responded strongly, making it clear that it plans to raise interest rates further and keep them at higher levels until it makes progress towards defeating inflation. The market now expects the Fed to keep its course.
As a result, its powerful message may be on the verge of change, or at least unanimously unheard.
“I don’t think we need the resolute signal values anymore,” Daley said this week. “If anything, you might want data-dependent signal values.”