Inflation data confirm the Fed’s actions
2023.01.12 13:37
Inflation data confirm the Fed’s actions
By Kristina Sobol
Budrigannews.com – According to St. Louis Fed President James Bullard on Thursday, the U.S. economy is geared up for disinflation this year, but the path back to the Federal Reserve’s 2% target will be bumpy and require interest rates to remain higher for a longer period of time.
During an event put on by the Wisconsin Bankers Association, Bullard said, “It is encouraging that we got some information today that went in the right direction.” He was referring to government data that was released earlier on Thursday and showed that consumer prices in the United States fell for the first time in more than two and a half years in December. So far, all is well. My conclusion regarding 2023 is that it will be a year of inflation decline.”
Investors in fed funds futures predicted, based on the data, that the Fed will decide to raise interest rates by a quarter of a percentage point at its next policy meeting on February 1 and will stop raising rates before they reach 5%.
Also, Bullard said that he wanted the Fed’s policy rate to be higher than 5% “as soon as possible.” However, he said that getting there quickly isn’t as important as getting there at all, and the Fed shouldn’t cut rates quickly even if inflation keeps going down.
“There is probably too much optimism that inflation will quickly return to 2%. Bullard stated, noting that he anticipates a bumpy road down, “That is not the history of inflation.” As we attempt to maintain downward pressure, we are really entering an era of higher nominal interest rates for quite some time to come.”
The Federal Reserve’s main policy rate is currently between 4.25 percent and 4.50%, and policymakers have already made it clear that they hope to stop raising rates this spring.
Additionally, Bullard reiterated last week’s remarks that recession risks had diminished “some” over the past three months and that the prospects of inflation falling without a sharp rise in unemployment—a so-called “soft landing”—had improved.
More Inflation and unemployment claims decline in the U. S.
