The Fed last week raised its policy rate to the 5.25%-5.50% range, the 11th increase in the last 12 meetings. That may point to at least one more rate hike even as investors bet the Fed is finished, with rate futures markets reflecting no more than a roughly one-in-four chance of another increase. The risks of doing too little - that asymmetry - is still there." You are seeing an economy that is resilient in terms of activity but also stubborn on underlying inflation. "We all wish we could slow the economy 'just enough,'" Bomfim said. That shows both how hard it is to arrest a slide once it begins, and how difficult it is to match the slow-moving effects of monetary policy with what the economy might need months in the future.Īllowing high inflation to become embedded in the economy is central banking's cardinal sin, and Fed officials would still rather make the mistake of going too far to be sure inflation is controlled than stop short and risk its rebound, said Antulio Bomfim, head of global macro for the global fixed income team at Northern Trust Asset Management and a former special adviser to the Fed's board of governors. central bank reached its peak rate level and had begun reducing borrowing costs anywhere from three to 13 months ahead of what proved to be the start of a downturn. In the three recessions prior to the coronavirus pandemic - 1990-1991, 20-2009 - the U.S. WASHINGTON (Reuters) - Throughout the Federal Reserve's drive to kill inflation, policymakers have focused on raising the benchmark overnight interest rate high enough to do the job and getting it there fast enough to keep the public from losing faith.īut in the quest for a "soft landing," where inflation falls without a recession or big job losses, the other half of the conversation - of when to cut rates and lighten the pressure on households and businesses - will be just as important and perhaps even harder to get right.
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