The Federal Reserve Governor Chris Waller said on Thursday that he will need "at least another couple more months" of data to cut interest rates due to inflation. He acknowledged higher than expected inflation readings for January, which questions the trajectory of prices. While Waller said he still expects the Fed to begin lowering rates at some point, he said he sees “predominately upside risks” to his expectation that inflation will drop to the Fed’s 2% goal. He also added that there are few signs that inflation will fall below 2% anytime soon. 3.3% annualized growth in GDP and an increase in employment show that a recession is not in sight anytime soon. I believe that taking this cautious approach is a good idea. With not many signs pointing to a recession, there is no reason to rush and cut rates quite yet.
We talked in class about how the Fed announcing it will do something can lead consumers to change their habits as if the change or lack of change has already occurred. Because the Fed has said they will need more months of data before cutting rates, I believe consumer and investor actions will also not change much.
ReplyDeleteIn light of Federal Reserve Governor Chris Waller's cautious stance on interest rate cuts due to inflation concerns and the absence of recession indicators, it is interesting to think how this prolonged data-gathering period may impact the Federal Reserve's decision-making process, particularly regarding its dual mandate of maximizing employment and stabilizing prices.
ReplyDeleteInvestors who are waiting on the Fed cutting rates should start thinking this might happen later (maybe around June or July instead of March). Based on recent statements from the Fed, it's unlikely to be soon.
ReplyDeleteIn my opinion, I think that the economy is doing ok now, with stable growth and job numbers increasing, especially from January. So I think they do not need to immediately cut rates.
I am curious as to how this will affect the markets. Since they are always looking into the future, how will the prices go? I do not see much concern with the rate at which inflation is growing right now as the GDP is relatively similar.
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