And if there’s one thing the Fed doesn’t want to do, it is to give financial markets any signal that rate cuts are coming some time soon.Ī hawkish Fed wants to keep hopes in check The Fed held rates steady for nine straight meetings over the span of a year the last time it paused a rate-hiking campaign in 2006.īut there’s still the very real risk of US consumers simply accepting higher prices if inflation’s defeat stalls for too long, making a case for one more rate hike. That could take a several months or even a year. The end of rate hikes would usher in the next phase of the Fed’s inflation fight, which would likely be to simply hold rates steady until inflation is fully tamped down. “We continue to see signs that the economy is slowing down, which tells me the restrictiveness is working.” “I have the view that we can be patient - our policy right now is clearly in the restrictive territory,” Atlanta Fed President Raphael Bostic said in a speech earlier this month. Former Fed chair Ben Bernanke, who steered the central bank during the financial crisis and who recently co-authored a widely cited paper on inflation’s origins, recently said the July hike might just be the last one.Īnd there is certainly a dovish camp at the Federal Open Market Committee, the central bank committee that decides interest rate moves, so the end of rate hikes after July is very much a possibility. Here's what inflation's slowdown has meant for US businessesĬonsumer optimism is a great sign for the Fed because it means Americans have faith that inflation will eventually come down to a sustainable level they’re familiar with. The Commerce Department releases the June reading of the Fed’s favorite inflation measure Friday.Ī store displays an 'open' sign along a street in Manhattan on Februin New York City. The Fed’s preferred inflation gauge - the Personal Consumption Expenditures price index - rose 3.8% in May from a year earlier, down from the 4.3% annual rise seen in April. The Consumer Price Index rose 3% in June, a much slower pace than the four-decade high of 9.1% in June 2022. ![]() That’s all thanks to inflation’s cooldown. Some Wall Street bankers now think a mild recession might happen later than expected. The economy’s remarkable resilience has quelled fears of a recession somewhat. This new-found confidence comes as inflation has slowed and the economy has held up - all on the backdrop of 10 straight rate hikes since the Fed began to lift rates in March 2022. Also, economists are noticing better business conditions and investors have grown more bullish on the Fed’s chances of pulling off a soft landing, a scenario in which the central bank succeeds at bringing down inflation without tanking the economy. But right now, there’s no denying there’s optimism in the air.Īmericans haven’t felt this optimistic about the economy and the potential for inflation to ease since 2021. It’s anyone’s guess what will ultimately transpire, since the economy has consistently defied expectations. There are three possibilities for what the Fed might do moving forward, according to economists: a second consecutive rate hike in September, one in November, or no more rate hikes after July. Fed Chair Jerome Powell’s remarks during an annual gathering of central bankers and economists in Wyoming next month could shed more light on what to expect for the September decision. ![]() That’s why the Fed is trying to retain the option of another rate increase in case inflation proves to be more resilient than expected. Much depends on what economic data show in the next eight weeks - and things can go either way. ![]() The Fed is debating getting rate hikes out of the way sooner (Graeme Sloan/Sipa USA)(Sipa via AP Images) Graeme Sloan/Sipa USA/AP Federal Reserve, in Washington, D.C., on, Tuesday, March 21, 2023.
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