Source: AFP
The U.S. Federal Reserve is making good progress in its fight against inflation, senior bank officials said on Tuesday, while expressing mixed views on the chances of another rate hike.
The central bank recently voted to keep its key lending rate at a 22-year high, raising expectations that it will raise rates as it seeks to steadily reduce inflation to its long-term target of 2%.
But while Fed officials welcomed the rapid decline in inflation from last year’s post-pandemic high, they remain divided on the best course of action going forward.
Some policymakers, including Fed Chairman Jerome Powell, have said they are willing to raise interest rates again if necessary to keep price increases firmly on target.
“I’m encouraged by what we’ve learned over the last few weeks — something seems to be giving and it’s the pace of the economy,” Fed Governor Christopher Waller said at a conference in Washington.
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The economic data from October “is consistent with the kind of subdued demand and easing of price pressures that will help get inflation back to 2%,” he added.
The strong economic growth of the first three quarters of the year looks set to slow in the final quarter of 2023, Waller said, pointing to a decline in interest-sensitive retail spending for October.
Meanwhile, inflation moved “in the right direction in October, albeit gradually,” and the tight labor market is showing some signs of cooling, he added.
Speaking shortly after Waller, the Fed governor’s colleague Michelle Bowman told a conference in Utah that there had been “significant progress in reducing inflation, so far without affecting the strength of the labor market and economic activity.”
In prepared remarks, Bowman said she still expects the Fed will need to raise its key lending rate again in order to keep policy tight enough and return inflation to 2 percent “in time.”
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She qualified her comments by saying she would be willing to support another hike if “incoming data suggests that progress on inflation has stalled or is insufficient.”
This suggests a willingness to keep interest rates steady if incoming data continues to align with the Fed’s targets.
Futures traders are currently assigning a roughly 96% chance that the Fed will vote to keep interest rates steady on Dec. 13, according to CME Group data.
Source: AFP