According to senior Federal Reserve officials, the US central bank is “very focused” on curbing “too high” inflation and could do so without causing a recession.
New York Fed President John Williams of the Central Bank decision This week, we’ll accelerate the shrinking of our asset purchase program so that the stimulus is completely over a few months ago. First outlined In November.
He called it “just the right thing” and said it gave the Fed the flexibility to tighten monetary policy next year more substantially.
“It really is to put our monetary policy stance in a good position, and apparently at some point next year, to create an option to actually start raising the target range of federal funding,” Williams said with CNBC. I mentioned in an interview.
Christopher Waller, president of the Federal Reserve Board (FRB), said individually on Friday at an event hosted by the Forcast Club in New York.
“I believe that the federal funds rate target range is guaranteed to grow shortly after the asset purchase is complete,” he said.
Authorities expect three rate hikes in 2022 and three more in 2023, according to new forecasts released by the Fed this week. Two-step adjustments will be made in 2024, with the key policy rate approaching 2%. ..
Forecasts suggest that interest rates will rise dramatically next year than they had expected when the Fed officials last released the forecast three months ago.
They come after strong economic data and clear signs that inflation is becoming a more permanent issue and is spreading beyond the sectors most sensitive to pandemic-related turmoil.
“We are very focused on inflation, which is clearly too high now,” Williams said on Friday. “We want to make sure that inflation returns to our long-term target of 2%.”
Waller, who characterized inflation as “surprisingly high,” said he thought the economy was “approaching maximum employment.” This is the last condition the Fed must meet before proceeding with rate hikes.
Current market price suggest By taking an early and aggressive stance to counter rising price pressures, the Fed will be significantly limited in its ability to raise interest rates as economic growth slows.
The implicit interest rates on the Sofr and Eurodollar contracts from 2024 to 2026 are now below 1.5%, well below the long-term 2.5% target expected by the majority of Fed officials.
Williams said on Friday that he was “confident” that the Fed could achieve “stable low inflation” without sharply curtailing economic growth, giving some relief.
He said higher interest rates should be taken as an indication of how strong the economy really is.
“I feel like next year [like] The baseline outlook is very good, “he said. “Therefore, actually raising interest rates would be a sign of positive progress in terms of where we are in the business cycle.”
Williams predicts a continuous “strong improvement” in the labor market, which is beginning to regain momentum. Currently, the unemployment rate is 4.2%.
The Federal Reserve expects inflation to fall to 3.5% next year, with inflation still rising to 2.7% and the economy expanding at 4%.
Waller has flagged the Omicron variant as “great uncertainty.”
“I also don’t know if Omicron will exacerbate labor and supply shortages, increase inflationary pressures, and upset my baseline of inflation easing next year,” he said.
Raising U.S. interest rates will not cause a recession, Fed executives say
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