And that’s what’s driving expectations for a maximum of one or possibly two more rate hikes before the current tightening cycle is over. Recently the inflation data has been much improved. “We say this to emphasize that policy is never on a preset course and will change as appropriate in response to incoming information.” “At the Fed, we like to say that monetary policy is data dependent,” said Powell in a 2019 speech. That means the central bank isn’t simply making it up as it goes along-it relies on economic data reports to inform monetary policy decisions. The Fed Is Data Dependent-and the Data Keeps Getting Betterįed officials like to reiterate that monetary policy is data dependent. Now all the Fed has to do is decide when to completely halt rate hikes and eventually pivot to easing. The S&P 500 is up more than 17% year-to-date thanks in part to inflation optimism. Minutes from the June FOMC meeting suggested that officials gave Fed Chair Jerome Powell unanimous support for a pause in exchange for another rate hike in July. Still, Fed officials warn that more work is needed to completely tame inflation. Recent data confirm that inflation is cooling, while the most recent University of Michigan consumer confidence survey shows that even inflation expectations are falling. That means it’s bringing down inflation while avoiding a recession. More and more, it appears that the Fed is successfully navigating a “soft landing” for the U.S. If the FOMC meets these expectations, it would bring the fed funds target range to between 5.25% and 5.5%-a nearly 22-year high. Heading into the July meeting, it’s all but certain the Fed will resume raising rates once again.įinancial professionals see a 92% chance that the central bank will deliver a quarter of a percentage point rate increase on July 26, according to CME Group. At the June FOMC meeting, the Federal Reserve tapped the brakes after ten consecutive interest rate hikes.
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