New York Federal Reserve President John Williams hinted on Friday (29th) that the Fed’s interest rate hikes may be over, but that interest rates will remain at high levels “for some time” to allow inflation to recover. to the 2% target.
“My current assessment is that we have reached or are close to reaching the top of the federal funds rate target range,” Williams said in remarks prepared for an event on Long Island, New York. “I expect we will need to maintain a restrictive monetary policy stance for some time.” time.”
The remarks represent a clear statement from senior Fed officials that the most aggressive monetary tightening in 40 years may be over. Williams was unable to attend the event due to family reasons, but still released the text of his speech.
Williams said he forecast inflation at 3.25% this year, falling to 2.5% in 2024, and falling further to “near” 2% in 2025.
The Fed announced last week that interest rates would remain unchanged at a 22-year high of 5.25-5.50%. The dot chart shows that 12 out of 19 officials predict another interest rate increase this year, while 7 others predict no change. Additionally, officials overall forecast only two rate cuts next year, down from the four dot chart forecast in June, in part because of the strong labor market.
The U.S. Department of Commerce announced on Friday that the Fed’s preferred inflation indicator has cooled, with the core personal consumption expenditures (PCE) price index increasing by 3.9% annually and 0.1% monthly in August.
Williams said on Friday that while inflation was moderating, it was still too high and that imbalances in the labor market were reducing, but demand must fall further.
He believes that the biggest challenge at hand is ensuring that housing and labor costs continue to fall. It also shows that house prices, rents and wages are the biggest forces fueling recent inflation.
He predicted that the current unemployment rate of 3.8% in the United States will rise to slightly more than 4% by next year, and next year’s gross domestic product (GDP) is expected to grow by 1.25%.
However, after the PCE inflation was released, some analysts believed that the latest inflation outlook released by the Fed last week seemed outdated, and therefore concluded that the chance of raising interest rates again this year has decreased.
Neil Dutta, economic director at Renaissance Maro Research LLC, said that the Fed estimates that the inflation rate by the end of this year will be 3.7%. Judging from the data released so far, it means that the inflation rate in the next four months will need to rise significantly, such as the core The monthly growth rate of PCE is another 0.3%, or an annual growth rate of 4%, which is a relatively high level, “meaning that the Fed may not be able to raise interest rates at either of the next two meetings (November and December).”
2023-09-29 23:52:58
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