Federal Reserve officials are in favor of a three-quarter rate hike at a meeting later this month, but leave the possibility of a bigger move if economic data become particularly strong. Fresh economic statistics released on Friday could give them a reason to move in either direction.
Most notably, carefully monitored measurements of long-term inflation expectations have been relaxed. It gives central bankers the conviction that prices are not embedded in the American spirit so high that they are self-fulfilling prophecies as people demand higher wages and change their spending patterns. must.
Data can be important for officials to make good progress towards a three-quarter rate hike. Stocks have jumped into the news, suggesting that investors believe the Fed is showing no major rate hikes this month. market.
In a note following Friday’s data, Evercore ISI analyst Krishna Guha wrote that inflation expectations are likely to “break” the Fed out of the full-point rise.
At the same time, retail sales are unexpectedly strong, suggesting that demand is sluggish despite the Fed’s efforts to curb high interest rates. It may provide evidence of a full point rate increase. “With today’s strong report, the Fed remains in an aggressive policy tightening mode,” said Kathy Bosjanchić, chief US economist at Oxford Economics.
These two new economic measurements follow the higher-than-expected consumer price index measurements in June. Time to cool down.
Following the report, some Fed officials support a three-quarter point increase at the central bank’s July 26-27 meeting, but monitor data on future consumer spending and inflation expectations. He said he would determine if there was a bigger move. I needed it. Data show that consumption remains strong, but inflation expectations are less worried, so they are likely to leave central bank options open.
Still, it is difficult to get a clear signal from either because both data points are revised.University of Michigan’s July inflation expectations have fallen Up to 2.8% Preliminary data from the previous 3.1% reading will be followed by the final figures for the month, which may differ, on July 29th.
Most officials have signaled that a three-quarter point increase is still their preference, while avoiding full-point moves completely off the table.Look at the market now Increase full points as much as possibleBut unlikely.
Atlanta Federal Reserve Bank Governor Raphael Bostic was hesitant to accept a higher rate hike than last month’s three-quarter point hike by the central bank on Friday morning. An event in Florida where he doesn’t want to move ratesToo dramatic.. “
