How Fed Reach 2% Inflation?
Fed could try to get to 2% quickly, such as by the end of next year,
by raising rates higher and only slowly reducing them as the economy weakens. That would risk a sharper downturn and possibly kill the chances of achieving the soft landing.
On the other hand, if they’re satisfied that inflation is slowing durably, they could hold them at their current level and consider trimming rates later next year.
That would take more time to get to the inflation target—around three years.
Many economists still see a risk of recession over the next year - stress on commercial real estate and regional banks.
“I’ve been in the two-point-something camp. It is important that it starts with a two,” said Richard Clarida, Fed vice chair from 2018 until early 2022. “That sounds arbitrary, but some things in life are arbitrary.”
With a higher target of 3%, interest rates would be higher in good times, giving the Fed more scope to counteract downturns by cutting them.
Nick Timiraos Wall Street Journal 22 August 2023
Inlägg med etikett 2p
https://englundmacro.blogspot.com/search/label/2p
Kommentarer