The Fed hiked rates, despite lackluster economic data, and will continue.
Nothing new on the western front. At its February 2023 meeting, the Federal Reserve raised the reference range for the fed funds rate by 25 percentage points, bringing it to 4.5%-4.75%, reducing the size of the increase for the second time consecutive, but still pushing borrowing costs to the highest since 2007. The decision was in line with market expectations. Policy makers added that continued increases in the reference range will be appropriate to achieve a monetary policy stance tightening enough to bring inflation back to 2%. During the regular press conference, President Powell reiterated that the disinflation process is in an early stage and that interest rates are not yet at a sufficiently restrictive level thus giving a strong signal on the continuation of the restrictive monetary policy . In determining the size of future rate hikes, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. Here is the related graph
So the FED does not stand still, despite the fact that the forecast data on the performance of the manufacturing sector (PMI) are low, signaling a future recession of the sector
Furthermore, even the data on the creation of new jobs were not encouraging, indeed they were below expectations. Add to this the decline in home values and the increase in delinquencies in the auto loan sector to show how the US economy is suffering from the monetary tightening. But Powell continues to give hawkish signals. How far can he go forward? Is this just a cover position or is he really going to create a financial crisis?
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The article The FED has raised rates, despite the lackluster economic data, and will continue .. comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-fed-ha-aumentato-i-tassi-nonostante-i-dati-economici-non-brillanti-e-andra-avanti/ on Thu, 02 Feb 2023 10:00:23 +0000.