Experts are divided on whether the US Federal Reserve should raise its interest rate target to 3% to combat inflation and cushion against recessions, with some arguing that raising inflation targets would be futile.
The US Federal Reserve must consider the possibility of the economy reaccelerating rather than slowing, which could have implications for its inflation fight, according to Richmond Fed President Thomas Barkin. He noted that retail sales were stronger than expected and consumer confidence is rising, potentially leading to higher inflation and a need for further tightening of monetary policy.
The Federal Reserve aims for a "soft landing" in guiding the US economy by raising interest rates to control inflation while avoiding a recession, with signs of stabilization appearing in Jackson Hole's economy as supply chains normalize and pricing pressures ease.
Two Federal Reserve officials suggest that interest-rate increases may be coming to an end, but one of them believes that further hikes may still be necessary depending on inflation trends.
Federal Reserve Bank of Philadelphia President Patrick Harker does not believe that the U.S. central bank will need to increase interest rates again and suggests holding steady to see how the economy responds, stating that the current restrictive stance should bring inflation down.
Boston Federal Reserve President Susan Collins stated that the central bank may require additional interest rate hikes and will likely maintain elevated rates for an extended period, even if no further increases occur in the near future.
Two officials at the Federal Reserve have expressed differing views on whether or not the central bank should raise its benchmark interest rate again to combat inflation, highlighting the uncertainty surrounding future rate hikes, with more clarity expected from Federal Reserve Chair Jerome Powell's upcoming speech at a Fed conference in Jackson Hole.
As Jerome Powell, the chair of the U.S Federal Reserve, prepares to speak at the Jackson Hole symposium, the big question is whether he will signal a major shift in how central banks deal with inflation, particularly regarding interest rates and inflation targets. Some economists are suggesting moving the inflation target range from 2-3 percent, while others argue for higher targets to give central banks more flexibility in combating recession. The debate highlights the challenges of setting and changing formal inflation targets and the ongoing changes in the factors that drive growth and inflation.
Federal Reserve Chair Jerome Powell warned that the fight against inflation still has a long way to go, emphasizing the need for extended periods of elevated interest rates to restore price stability. Powell stated that although inflation has cooled, the improvement may be temporary, and the Fed is committed to lowering inflation to their 2% target.
The president of the Federal Reserve Bank of Philadelphia believes that the US central bank has already raised interest rates enough to bring inflation down to pre-pandemic levels of around 2%.
Cleveland Federal Reserve Bank President Loretta Mester believes that beating inflation will likely require one more interest-rate hike in the U.S. and then pausing for a while, although she may reassess her previous view of rate cuts starting in late 2024, and she aims to set policy so that inflation reaches the Fed's 2% goal by the end of 2025 to prevent further economic harm.
Top central bankers, including Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde, emphasized the importance of keeping interest rates high until inflation is under control while also grappling with economic challenges and uncertainties at the annual Federal Reserve gathering in Jackson Hole, Wyoming.
Former White House economist Kevin Hassett predicts that the Federal Reserve will raise interest rates again due to increasing inflation and energy prices.
The Federal Reserve meeting in September may hold the key to the end of the tightening cycle, as markets anticipate a rate hike in November, aligning with the Fed's thinking on its peak rate. However, disagreement among Fed policymakers regarding the strength of the economy and inflation raises questions about the clarity and certainty of the Fed's guidance. Market skeptics remain uncertain about the possibility of a "soft landing," with sustained economic expansion following a period of tightening.
The former president of the Boston Fed suggests that the Federal Reserve can stop raising interest rates if the labor market and economic growth continue to slow at the current pace.
The Federal Reserve's preferred inflation gauge increased slightly in July, suggesting that the fight against inflation may be challenging, but the absence of worse news indicates that officials are likely to maintain interest rates.
Federal Reserve Governor Christopher Waller acknowledges that recent strong economic data will allow the central bank to proceed cautiously with potential interest rate hikes as it assesses whether inflation is under control.
Boston Federal Reserve President Susan Collins advocates a patient approach to policymaking and believes that more evidence is needed to determine if inflation has been tamed, stating that the Fed may be "near or even at the peak" for interest rates but further increases could be necessary depending on data outcomes.
Bond traders are anticipating that the Federal Reserve will continue with interest-rate hikes, and next week's consumer-price index report will provide further insight on how much more tightening may be required to control inflation.
Stronger-than-expected U.S. economic data, including a rise in producer prices and retail sales, has sparked concerns about sticky inflation and has reinforced the belief that the Federal Reserve will keep interest rates higher for longer.
The Federal Reserve is expected to maintain one more rate hike on the table in their updated forecasts, despite their growing faith in the prospect of an economic soft-landing.
Federal Reserve Chair Jerome Powell is expected to maintain a cautious approach and emphasize the Fed's resolve to target inflation and keep interest rates high for an extended period at next week's policy meeting, according to economists. The general consensus among economists is that the Fed will keep rates steady and suggest a possible rate hike later this year while closely monitoring inflation and the labor market.
The Federal Reserve is expected to signal that another rate hike may be necessary due to strong economic growth and inflation metrics, creating a difference of opinion between the equity and bond markets.
The Federal Reserve faces the challenge of bringing down inflation to its target of 2 percent, with differing opinions on whether they will continue to raise interest rates or pause due to weakening economic indicators such as drops in mortgage rates and auto sales.
The Federal Reserve is expected to keep interest rates steady and signal that it is done raising rates for this economic cycle, as the bond market indicates that inflation trends are moving in the right direction.
The upcoming U.S. Federal Reserve meeting is generating less attention than usual, indicating that the Fed's job of pursuing maximum employment and price stability is seen as successful, with labor market data and inflation trends supporting this view.
The Federal Reserve's upcoming meeting will focus on the central bank's expectations for key indicators such as interest rates, GDP, inflation, and unemployment, while many economists believe that the Fed may signal a pause in its rate-hiking cycle but maintain the possibility of future rate increases.
The Federal Reserve officials signal that they believe they can control inflation without causing a recession, with forecasts of higher economic growth and unchanged inflation outlook.
The U.S. Federal Reserve kept interest rates steady but left room for potential rate hikes, as they see progress in fighting inflation and aim to bring it down to the target level of 2 percent; however, officials projected a higher growth rate of 2.1 percent for this year and suggested that core inflation will hit 3.7 percent this year before falling in 2024 and reaching the target range by 2026.
The Federal Reserve is paying attention to "real" interest rates, which measures rates adjusted for inflation, and is using this to inform its decisions regarding future rate hikes and inflation.
The Federal Reserve's measure of inflation is disconnected from market conditions, increasing the likelihood of a recession, according to Duke University finance professor Campbell Harvey. If the central bank continues to raise interest rates based on this flawed inflation gauge, the severity of the economic downturn could worsen.
Federal Reserve policymakers Governor Michelle Bowman and Boston Fed President Susan Collins expressed the need to keep interest rates elevated to combat inflation, with Bowman suggesting further rate hikes will likely be needed to bring inflation down to the Fed's 2% target and Collins stating that further tightening is not off the table as progress in battling inflation has been slow.
