Fed-new forecasts for an increase in the economy and rates
2022.12.02 11:07
Fed-new forecasts for an increase in the economy and rates
Budrigannews.com – Despite the expected increase in the interest rate by half a point this month, in the new forecasts of the US Federal Reserve, it can be argued that the Central Bank’s central rate will approach the level that was last observed on the eve of the crisis in 2007.
They will also reveal the best assumptions of politicians on the consequences for the labor market, which remains stable. Stronger than expected in November in the United States showed an increase in the number of employees, an increase in hourly wages by 5.1 per year and a reduction in the number of the working group. All these data indicate that the labor market is both very tense and changing rapidly, although the Federal Reserve Service hopes for the beginning of its cooling.
Although the current market forecasts of a reduction in rates at the end of next year will show that rates will continue to rise, and will be raised until 2023. This is combined with the only currently modest inflation. Economist James Simons wrote: The Fed told us that it would take a long period of restrictions to raise the unemployment rate, as well as to reduce the rate of wage growth, and the data today provide even more evidence.
This will not interfere with the Fed’s course for an expected rate increase of 50 basis points at the next meeting and strengthens confidence that the final rate will exceed 5 next year. Federal funds rates peaked at about 5.25% in June 2006 and July 2007, during the financial crises and crises that lasted from 2007-2009.
Officials will have a new opportunity to show how their “raise” and “hold” strategies are expected to work at the final level of interest rates and the progression of economic development, inflation, especially labor shortages, in an updated forecast to be published after the Open Markets FC meeting, which will be held on December 13 and 14, as part of the meeting FC “Open Markets”.
The meeting will end an unstable year in which the Central Bank increased the interest rate to compensate for the fastest rise in inflation in the 1980s. As a result of the aggressive response, the financial system was shaken, at some time the value of the US stock markets fell by almost $ 12 trillion, and mortgage rates rose to seven for those who are used to low interest rates. Since Fed Chairman George Powell announced the Fed’s readiness to abandon four consecutive rate hikes by 3 quarters of a point instead of the expected increase by one and a half points, the stock market has recently risen and grown.
The Fed chairman, who is striving to maintain tight financial conditions and public expectation is firmly focused on fighting lower inflation, may not like the result. But Powell also spoke directly about the compromise.
The interest rate is being raised at an unspecified “appropriate restrictive” stop point, officials intend to keep it there “for a while” even if the Central Bank starts moving in increments of up to half or a quarter of a point over the coming months. “And the President of the FRB “”St. Louis”” James Boulard and the President of the FRB “”San Francisco””Mary Daley, often on the opposite side of recent political discussions, discussed the possibility of raising rates below 5 next year.”
Last week, Paul gave a long speech at the Brookings Institution. During this time, he spoke in detail about what the transition of the United States to a world with a high interest rate, a constant shortage of labor and only a slow decline in inflation looks like.
He said that it is clear that it is necessary to withdraw energy from the labor market, in which the demand for employees remains much higher than the number of people ready to work. This imbalance is a consequence of the pandemic and immigration policies in the United States, as well as the imbalance itself. According to Fed officials, how much this, according to Fed officials, will affect the growth of unemployment, as well as the slowdown in economic indicators, will be included in the new economic summary. Powell said he still sees a “plausible” path to a “soft” landing, with few seat losses.
On Thursday, data was published showing that on average for October, the Fed’s preferred inflation was 6 percent, which is lower than the September figure of 6.3 percent, as well as the lowest figure of the current year, but three times higher than the target level of 2 percent.
On Friday, there were no indications of a change of employment in the data, there were also no indications. The economy has added an average of 39.2 thousand jobs per month this year. Although in August and November the indicator decreased to 27.7 thousand, it was still above 183 thousand.
Monthly indicators that were adopted during the decade when the pandemic began. Throughout the year, the Fed’s forecast sought to match reality. In December of this year, the official authorities predicted a reduction in the preferred inflation rate to 2.6, and the interest rate will remain only 0.9 until 2022. Only 1 is the highest forecast of individual Fed funds.
Four times it was less, the interest rate will be between 4.25 and 4.5 at the end of the year, an expected increase of half a point in the next session. Last week, Powell acknowledged that the problem of determining the climate is really worrying about the pandemic and its delayed consequences.
However, the choice is small, since the central bank, as Paul described it, begins to “grope” the way to stop and ends with its rapid increase in rates “ahead of schedule” with a larger increase.
As of September, the Fed’s report still predicted a favorable result of continued economic growth, steady progress in inflation, and the unemployment rate, which will decrease by at least 1% to 4.4 at the end of this year. This will be what someone called “flawless disinfection”, which would cost a real household without much expense.
The Fed funds rate was expected to remain at 4.6 in 2023. Powell said it needed to be “a little higher” and employment data in November could push it higher. The future forecast will allow a more accurate assessment of whether labor markets will be able to withstand this ultimate goal, which may begin to become obvious.
On Twitter, the former head of the White House Council of Economic Advisers, George Furman, said that the average earnings figures for November, as well as the revised figures for recent months, “coincide with inflation of about 5.” I allowed myself to be more optimistic in terms of a gentle rise, but this largely dispelled hope.”
