US interest rates likely to stay high for some time: Fed
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The minutes of the most recent rate decision published on Jan 3 did not delve into details of a discussion that Fed chair Jerome Powell alluded to in December’s press conference, about when it would be appropriate to start cutting rates.
PHOTO: AFP
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WASHINGTON – United States Federal Reserve officials expect interest rates will need to remain high “for some time” to tackle stubborn inflation, according to minutes of the most recent rate decision published on Jan 3.
The Fed announced in December that it would continue to hold interest rates at a 22-year high, and pencilled in up to three rate cuts in 2024,
Since then, Fed officials have looked to dampen the buoyant market expectations that cuts were imminent, stressing that inflation remains stuck above the central bank’s long-term target of 2 per cent.
In December, the Fed’s rate-setting committee “reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably” towards the target, according to minutes of the meeting published on Jan 3.
The document did not delve into details of a discussion that Fed chairman Jerome Powell alluded to in December’s press conference, about when it would be appropriate to start cutting rates.
Since peaking in 2022, the Fed’s favoured inflation gauge has fallen sharply, reaching an annual rate of 2.6 per cent in November.
So-called core inflation, which strips out volatile food and energy prices, cooled in December to an annual rate of 3.2 per cent.
At the same time, economic growth has shown signs of moderating, the job market appears to be softening, and the unemployment rate has remained close to record lows.
These factors have fuelled hopes that the Fed is on track to bring down inflation while avoiding a damaging recession, a rare feat known as a soft landing.
Speaking on Jan 3 at a conference in Raleigh, North Carolina, Richmond Fed president Tom Barkin said a soft landing was “increasingly conceivable, but in no way inevitable”.
But Mr Barkin, who is a voting member of the Fed’s rate-setting committee in 2024, added that there was “no autopilot” and that policymakers would continue to be guided by incoming data.
Futures traders have assigned a probability of more than 90 per cent that policymakers would vote to hold the Fed’s key lending rate steady again when they meet later in January, according to CME Group data. AFP
