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Fed Eyeing More Rate Hikes, But Not Yet
15 Oct
Summary
- Fed likely needs more rate hikes but timing is debated.
- Consumer price inflation rose to 3.7% in the 12 months through September.
- Labor market stability allows Fed to focus on price stability.
Federal Reserve officials, including San Francisco Fed President Mary Daly, are contemplating the necessity of additional interest rate hikes to curb persistent inflation. While Daly acknowledged that further adjustments are likely, she stressed that the timing remains under deliberation and there is no immediate urgency to act at the upcoming October 27-28 meeting.
Consumer price inflation has accelerated to 3.7% year-over-year through September, driven partly by higher gasoline prices. Despite this uptick, underlying inflation has not sharply increased, suggesting that a measured approach to policy adjustments is prudent. Daly noted that the current 3.75%-4.00% policy rate range and higher long-term borrowing costs are already impacting economic demand.
Daly highlighted the resilience of the labor market, stating it provides the Federal Reserve with sufficient room to concentrate on restoring price stability. She advocated for a thoughtful and deliberate decision-making process, emphasizing that multiple future meetings offer opportunities to reassess economic data and refine policy.
Financial markets are currently pricing in approximately a 40% chance of another rate hike at the upcoming meeting, reflecting a shift from earlier expectations of a more certain increase following the latest inflation report.
