The Federal Reserve You will need to Increase its key interest rate If a recent trend in surprisingly strong job growth and consumer spending persists, it could be even higher than expected. Fed Official Thursday.
“Recent data suggest that consumer spending isn’t slowing that much, that the labor market continues to run unsustainably hot, and that inflation is not coming dow as fast as I thought,” Fed Governor Christopher Waller In remarks that he intended to deliver at the meeting of the Mid-Size Bank Coalition This is America.
“If those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place before the data for January were released,” Waller said.
Waller, a member Fed’s The board and its interest rate setting committee are considered hawkish. They are more concerned with preventing inflation from spurring growth. But His recent views on rates and inflation reflect those of his colleagues.
Last Year, inflation, consumer spending, and job growth all showed signs that were slowing. Fed’s aggressive rate hikes were bearing fruit.
In December, Fed Officials predicted that the federal funds rates would rise to between 5% and 5.25%, then the Fed The pause would be a welcome development for economists and stock market volatility. That This would result in two additional quarter-point rate increases since the funds rate currently stands at 4.5% to 4.75%
But In January, Employers created a record 517,000 new jobs. Consumer Both spending and an underlying measure for retail sales increased by 1.8%. Inflation has risen More than you expected.
The The annual increase in consumer price index was 6.4%, down from 6.5%. But After posting a 0.1% increase in the previous month, the index rose 0.5% monthly. December.
Fed Officials are concerned that a strong labor market will continue to support the economy. Loads Consumer spending has pushed up consumer prices, which in turn has pushed up annual price increases to 9.1% last year. This was a record high for the country over 40 years. June.
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Markets Now you can predict the Fed Funds rate will increase to a range between 5.25% to 5.5%. This is half-point more than was predicted just a few weeks back. Waller It was suggested that the forecast could be right on the mark if things continue to move forward.
At Gleichzeitig, Waller Recognized that the strong January reports could have been a byproduct of unusually mild weather that boosted consumer spending and economic activity.
“If job creation drops back down to a level consistent with the downward trajectory seen late last year, and CPI inflation pulls back significantly from the January numbers and resumes its downward path, than I would endorse raising (the funds rate) a couple more times,” in line with the Fed’s December forecast.
Other Reports on February The next two weeks could determine the direction of job growth and inflation. Fed’s course in coming months.
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