Will the US Federal Reserve Bank (Fed) continue? interest rate increase at the first meeting of the year of the Federal Open Mayors Committee (FOMC) from January 31 to February 1?
This question was asked in the context that last year, the Fed raised interest rates 7 times to curb inflation spiked to a multi-decade high.
Entering 2023, inflation in the US has turned down. There are many opinions that the Fed should loosen monetary policy to support the economy’s “soft landing”, while curbing inflation and avoiding the risk of recession.
According to the latest report of the US Department of Labor, the consumer price index (CPI) in December 2022 of this country increased by 6.5% over the same period last year, down from 7.1% in November and significantly lower than the peak of 9.1% of June 2022. However, this figure is still far from the 2% inflation target set by the US.
In addition to slowing inflation, the US economy received more encouraging signals. In the last quarter of last year, the world’s largest economy grew at a rate of 2.9%, higher than the previous forecast of 2.8%, although slightly down from 3.2% growth in the previous quarter. March 2022. This partly reflects the US economy’s return to a more normal growth rate following a period of explosive growth thanks to the reopening of the economy, economic stimulus packages and the COVID-19 pandemic. controlled.
In its seventh rate hike since the beginning of 2022 in December 2022, the Fed decided to raise rates by 50 basis points, bringing rates to their highest level since 2007 at 4.25-4.5%. , ending the previous streak of four consecutive 75 basis points.
This shows that the Fed is really cautious in its monetary policy decisions, as stated at the beginning of the head. Fed that the US central bank will tighten monetary policy until the signs of the US economy turn positive and solid.
The possibility that the Fed will continue to raise interest rates is still the most chosen by experts. Speaking on January 19 in Chicago, Fed Vice President Lael Brainard said interest rates will need to remain high for a while even if inflation eases to ensure inflation returns to 2% in a safe way. sustainable, while pledging that the central bank will “stay the course” to combat price spikes.
Meanwhile, the majority of Fed policymakers have expressed support for continuing to raise interest rates, but at a slower pace.
[Lạm phát tại Mỹ tiếp tục hạ nhiệt trước cuộc họp quan trọng của Fed]
JPMorgan CEO Jamie Dimon thinks the Fed’s rate hike path will likely go far beyond current projections.
According to Mr. Dimon, there is a 50% chance that the current expectations are correct, saying that the Fed will raise the benchmark rate to around 5% and there is a 50% chance that the Fed will raise it to 6%.
This expert assessed that although the purchasing power of consumers is still strong, the potential risks are still large related to the Russian-Ukrainian conflict.
Fed officials also made the point that the agency may need to raise interest rates above 5% before pausing and keeping it for a while.
Raphael Bostic, president of the Atlanta Fed, said the Fed is committed to tackling high inflation and this might bring interest rates to between 5% and 5.25%.
San Francisco Fed President Mary Daly even predicted interest rates would be higher than this and it is too early to declare victory over inflation.
Philadelphia Fed President Patrick Harker predicts a few more rate hikes this year, but thinks the 75-basis-point rallies are definitely over and a 25-basis-point increase is the appropriate level in the coming year. future.
Previously, the FOMC always affirmed that a continuous increase in interest rates within the target range is appropriate to control inflation. The FOMC forecasts that the key short-term interest rate will reach between 5-5.25% by the end of 2023. That shows that the Fed is ready to raise the key rate and keep it there until the end of the year. .
People shop at a store in Washington, DC, USA. (Photo: THX/VNA)At a press conference at the end of December 2022, Fed Chairman Jerome Powell said that “our focus right now is really on getting the monetary policy position to a level that is tight enough to warrant inflation coming back down to the bottom target level over time, not a rate cut.”
He added that any discussion of a rate cut would only take place when Fed officials are confident that inflation is actually coming down.
Meanwhile, the Moody’s report warns that the inflation battle will take time.
In order for inflation to fall below the Fed’s target level, the labor market may need to “cool down” – reflected in slower hiring and fewer vacancies, according to Moody’s analyst Madhavi Bokil.
The pace of wage growth is unlikely to boost inflation, but is helping to boost consumer spending as households begin to gradually withdraw their savings during the pandemic.
Wage growth remained strong last year, as employers were reluctant to lay off workers they may have struggled to find since the pandemic, making the job market more difficult.
Expectedly on January 31, the US Department of Labor will release the Labor Cost Index (ECI) – a measure of wages and benefits. Data on job openings in December and a survey of manufacturers in January were also released. These indicators will partly affect the FOMC meeting.
Lan Phuong (VNA/Vietnam+)
