June 18, 2024

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The Fed is about to make its next move. Here are 8 quotes from Jerome Powell and other central bankers that point to what comes next.

2 min read

Federal Reserve Governor Jerome Powell delivers remarks during a conference at the Brookings Institution in Washington.Carlos Barria/Reuters

  • After 11 interest rate hikes, Federal Reserve officials appear divided on next steps.

  • Jerome Powell and other central bankers have signaled another rate hike could be on the table.

  • Markets predict 97% odds of no rate hike November 1, and 29% odds of a quarter-point hike in December.

In a bid to stamp out the highest inflation in four decades, Federal Reserve officials led by Jerome Powell have made 11 interest rate hikes since March 2022, putting an end to the easy-money era while pressuring the stock market and raising concerns about a coming recession.

Since the Federal Open Market Committee’s September meeting, several central bankers have signaled that interest rates could still go higher.

Others at the same time have countered, saying instead that the federal funds rate has likely peaked for this cycle. Recent volatility in the bond market that pushed the 10-year Treasury yield to 5%, as Jerome Powell has noted, may have done some of the Fed’s job for it, thus reducing the need for further monetary policy tightening.

Year-over-year inflation hovered at 3.7% in September, still nearly double the Fed’s 2% target. Bloomberg’s latest poll showed forecasters give 55% odds for a recession in the next 12 months.

Currently, markets see 97% odds of no adjustment at the November 1 meeting of the Federal Open Market Committee, according to CME’s FedWatch Tool, which would keep the fed funds rate in the 525-550 basis point range.

In December, traders see 29% odds for a 25-basis-point hike.

Here are eight quotes from policymakers that hint at what could come next.

Monetary policy outlook

1. Philadelphia Fed President, Patrick Harker, October 16: “Absent a stark turn in what I see in the data and hear from contacts…I believe that we are at the point where we can hold rates where they are.”

2. Federal Reserve chairman, Jerome Powell, October…

2023-10-25 21:48:33

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