Fed signals more interest rate hikes needed to fight sticky inflation
Michael Kantrowitz: ‘It takes time to digest’ Fed’s rate hikes
Piper Sandler chief investment strategist Michael Kantrowitz discusses the Federal Reserve’s management of rate hikes, financial conditions and the markets.
The Federal Reserve says inflation remains uncomfortably high and that additional interest rate hikes are necessary to wrestle it under control.
"The committee is strongly committed to returning inflation to its 2% objective," the Fed said in its semi-annual report to Congress released on Friday. The nation's central bank indicated that "ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive."
The report — which provides lawmakers with an update on monetary policy and economic developments — comes just a few days before Fed chair Jerome Powell testifies on Capitol Hill. He is slated to appear before the Senate Banking Committee on Tuesday and before the House Financial Services Committee a day later.
INFLATION STILL OUTSTRIPPING WAGES IN MOST US CITIES
U.S. Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., the United States, on Nov. 2, 2022. (Liu Jie/Xinhua via Getty Images / Getty Images) Central bankers are in the midst of the most aggressive campaign since the 1980s to crush stubbornly high inflation. Although the consumer price index has slowly fallen from a high of 9.1% notched in June, it remains about three times higher than the pre-pandemic average. Officials voted in February to raise the benchmark interest rate a quarter percentage point to a range of 4.5% to 4.75% and signaled that a "couple more" increases are on the table this year. That followed a half-point increase at their December meeting and four consecutive 75-basis-point moves before that. The Fed's rate-setting committee meets later this month. Markets widely expect the Fed to continue raising rates at a quarter-point pace, but a slew of hotter-than-expected economic data reports in recent weeks — including the blowout January jobs report and disappointing inflation data that pointed to the pervasiveness of high consumer prices — has raised the specter of a higher peak rate or steeper increases. The Labor Department reported in February that the consumer price index rose 0.5% in January, the most in three months. The annual inflation rate also surprised to the upside at 6.4%. Pedestrians near the US Treasury building in Washington, DC, Dec. 30, 2022. (Ting Shen/Bloomberg via Getty Images / Getty Images) That data has prompted some traders to reexamine their rate hike expectations for the year, with a growing number of investors now betting the Fed could raise rates higher than previously projected. About 33% of traders expect the Fed to increase the federal funds rate by another 75 basis points by the end of the year, while 64% expect rates to increase by 50 basis points, according to data from the CME Group's FedWatch tool. CLICK HERE TO READ MORE ON FOX BUSINESS Fed officials have acknowledged that rates may need to go higher than expected and remain elevated for longer. "My overall judgment is it will be a long battle against inflation, and we’ll probably have to continue to show inflation-fighting resolve as we go through 2023," St. Louis Fed President James Bullard said in February. "I wouldn’t rule anything out for that meeting or any meeting in the future." Source: Read Full Article
