2024-01-15 05:02:42
Federal Reserve Bank of Atlanta President Rafael Bostic announced that he expects to see much slower progress in inflation moving forward, citing some risks that inflation may stop completely.
Inflation might “swing” if policymakers cut interest rates too early, Bostic said, warning that the decline toward the central bank’s 2% target is likely to slow in the coming months.
This came following inflation rose to its highest level in decades during the summer of 2022, as inflation in the United States fell sharply during the second half of last year, paving the way for interest rate setters to consider reducing borrowing costs from their highest level in 23 years. At 5.25 to 5.5%.
Inflation
Bostic pointed out that inflation must return strongly and steadily to our target of 2%, as it would be a bad result if we began to ease and inflation began to rise up and down in a oscillating manner… This would undermine people’s confidence in the direction the economy is heading.
Consumer prices in the United States increased last December, with rents continuing to rise, which rose by 0.3% during the month, an annual increase of 3.4%, compared to economists’ expectations in a Archyde.com poll of an increase of 0.2% monthly and 3.2% annually.
Traders expect by 73.2% that the first US interest rate cut by 25 basis points will come in March, with several other cuts in the future.
Federal minutes
The minutes of the US Federal Reserve’s Monetary Policy Committee meeting, which was held last month, showed that the majority of Monetary Policy Committee members confirmed that interest rate cuts are likely to occur this year, while no date has been decided for this to happen.
In a clear indication of the progress they have made in reducing inflationary pressures, for the first time since June 2022, monetary policymakers did not use the phrase “unacceptably high” to describe inflation.
Uncertainty
What was striking during the meeting was that there was a high level of uncertainty regarding how or whether this would happen, as “almost all participants indicated that a lower range for federal funds interest rates would be appropriate by the end of 2024.”
According to the Fed minutes, “When discussing policy expectations, participants viewed the interest rate as likely to be at or near its peak for this tightening cycle, although they noted that the actual policy path will depend on how the economy develops.”
Fed officials pointed to the progress that has been made in the battle to reduce inflation rates, stressing that the supply chain factors that contributed significantly to the rise, which peaked in mid-2022, have subsided.
They also noted progress in achieving better balance in the labor market, although this is also a work in progress.
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