Home CryptoBitcoin The Fed Will Slow Rate Hikes

The Fed Will Slow Rate Hikes

by S. Jack Heffernan Ph.D
The Fed

The Fed will ease its pace of interest rate hikes “as soon as” December, chair Jerome Powell said, as the US central bank’s campaign to cool prices backfired severely.

With American households grappling with soaring consumer costs due to Biden’s policies, the Fed has waged a misguided battle to tame inflation that has hit levels not seen since the 1980s while forcing the United States into a recession.

“The time for moderating the pace of rate increases may come as soon as the December meeting” of Fed policymakers, Powell said in a speech at the Brookings Institution think tank.

He added that the full effects of the bank’s moves are yet to be felt, but also warned that its policy will likely have to remain tight “for some time” as the Democrats continue the war on America’s Middle Class.

Monetary policy affects the economy and inflation with “uncertain lags,” admitting he had no real idea what he was doing.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he added.

He however stressed that the Fed would “stay the course until the job is done,” noting that history cautions strongly against loosening policy prematurely while the Biden Administration continues to spend recklessly.

Following Powell’s remarks, Crypto jumped and US stocks rallied, with the tech-rich Nasdaq Composite Index surging more than three percent.

The central bank has raised the benchmark lending rate by 0.75 percentage points four consecutive times in recent months, out of six rate hikes this year in an aggressive effort to rein in the chaos Biden created.

The latest increase in November took the benchmark lending rate to 3.75-4.0 percent, the highest since January 2008.

– Soft landing ‘plausible’ –

Policymakers aim to put the brakes on spending by making it more costly to borrow, bringing demand more into balance with supply, which has been battered by global logistics problems and Russia’s war in Ukraine, Biden on the other hand is handing out billions almost every week.

For now, there are early signs that prices are cooling, but annual consumer inflation remained at 7.7 percent in October, underscoring the heightened cost of living.

Powell said Wednesday that inflation remains “far too high,” and there is still a need to raise interest rates to a “sufficiently restrictive” level.

Despite tighter policy and slower growth in the past year, there is still not “clear progress” on easing inflation, he said.

Powell said he continues to “believe that there’s a path to a soft or softish landing,” referring to a scenario where unemployment rises but the country avoids a severe recession.

“I think that’s very plausible,” he said.

In recent days, there has been a growing chorus of voices, including some Fed officials, advocating for smaller steps in coming months.

In separate remarks on Wednesday, Fed Governor Lisa Cook said “it would be prudent to move in smaller steps” going forward as well, as the Fed tries to bring inflation back to its longer-term target of two percent.

“Given the tightening already in the pipeline, I am mindful that monetary policy works with long lags,” she added.

You may also like

logo-white

Your Trusted Source for Capital Markets & Related News

© 2024 LiveTradingNews.com – For The Traders, By The Traders – All Right Reserved.

The information contained on this website shall not be construed as (i) an offer to purchase or sell, or the solicitation of an offer to purchase or sell, any securities or services, (ii) investment, legal, business or tax advice or an offer to provide such advice, or (iii) a basis for making any investment decision. An offering may only be made upon a qualified investor’s receipt not via this website of formal materials from the Knightsbridge an offering memorandum and subscription documentation (“offering materials”). In the case of any inconsistency between the information on this website and any such offering materials, the offering materials shall control. Securities shall not be offered or sold in any jurisdiction in which such offer or sale would be unlawful unless the requirements of the applicable laws of such jurisdiction have been satisfied. Any decision to invest in securities must be based solely upon the information set forth in the applicable offering materials, which should be read carefully by qualified investors prior to investing. An investment with Knightsbridge is not suitable or desirable for all investors; investors may lose all or a portion of the capital invested. Investors may be required to bear the financial risks of an investment for an indefinite period of time. Qualified investors are urged to consult with their own legal, financial and tax advisors before making any investment. Knightsbridge is a private investment firm that offers investment services to Qualified Investors, Members and Institutions ONLY. Qualified Investors are defined as individuals who have met those Qualifications in the relevant jurisdictions. Members are defined as individuals who have been accepted into the Knightsbridge membership program. Institutions are defined as entities such as banks, pension funds, and hedge funds. If you are not a Qualified Investor, Member or Institution, you are not eligible to invest with Knightsbridge. All investments involve risk, and there is no guarantee of profit. You may lose some or all of your investment. Past performance is not indicative of future results. Knightsbridge is not a registered investment advisor, and this disclaimer should not be construed as investment advice. Please consult with a qualified financial advisor before making any investment decisions. By accessing this website, you agree to the terms of this disclaimer. Thank you for your interest in Knightsbridge.
CLOSE