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Fed Chair Powell Expects More Interest Rate Hikes in 2023

June 22, 2023 by Marco Santarelli

Fed Chair Powell Expects More Interest Rate Hikes

Federal Reserve Chairman Jerome Powell recently reiterated that the fight against inflation is far from over and that more interest rate increases are likely in the near future. Speaking before the House Financial Services Committee, Powell indicated that the decision to hold off on rate hikes during the recent Federal Open Market Committee (FOMC) meeting was just a temporary pause and not a signal that the Fed is done raising rates.

Fed Chair Powell Expects More Interest Rate Hikes

Despite some moderation, inflation remains a concern, with pressures still running high. The Fed's focus on core inflation highlights the persistent upward pressure on prices. Powell's remarks underscored the importance of a gradual and cautious approach to policy adjustments, given the progress made and the need for a balanced economic landscape.

Inflation Concerns Persist

Powell acknowledged that while inflation has moderated somewhat since last year, it remains well above the Federal Reserve's target of 2%. He emphasized that inflation pressures continue to run high, and there is a long way to go before inflation can be brought down to the desired level. Despite recent cooling, inflationary pressures persist, and the central bank is committed to taking further action to address the issue.

Anticipated Rate Hikes

Following the recent FOMC meeting, officials signaled that they foresee an increase in interest rates totaling 0.5 percentage points by the end of 2023. This projection implies two additional rate hikes, assuming quarter-point increments. The current benchmark borrowing rate set by the Fed is in the range of 5% to 5.25%. Powell's remarks align with the consensus view among FOMC participants that further rate increases will be necessary in the coming months.

Assessing Core Inflation

When evaluating inflation, the Fed focuses on core inflation, which excludes food and energy prices. According to the central bank's preferred measure of personal consumption expenditures prices, core inflation was at a rate of 4.7% year-over-year through April. The core consumer price index for May stood at 5.3%. These figures demonstrate that core inflation remains elevated, emphasizing the need for continued vigilance and monetary policy adjustments.

Lagging Effects of Monetary Policy

Monetary policy measures, including rate hikes and the reduction of bond holdings on the Fed's balance sheet, often have delayed effects on the economy. As a result, the decision to abstain from raising rates during the most recent meeting was influenced by the need to observe the impact of previous tightening measures. Powell highlighted that the economy continues to feel the effects of monetary restraint, particularly in interest rate-sensitive sectors. The full consequences of this policy tightening will take time to materialize, especially with regard to inflation.

Adjusting Policy Pace

Powell acknowledged that the Fed has adjusted its approach to the policy after implementing aggressive rate hikes comparable to the early 1980s. Previously, the Fed had raised rates by 0.75 percentage points consecutively four times. However, Powell now believes that a more moderate pace is appropriate. He emphasized that given the progress made thus far, raising rates is still a viable option but should be done gradually and cautiously. The adjustment in policy pace reflects the evolving economic landscape and the need for a balanced approach.

Inflation Expectations and Economic Growth

Powell addressed the importance of well-anchored inflation expectations for predicting future price trends. He cited the University of Michigan consumer confidence survey, which showed a dip in inflation expectations for the next year to 3.3%, the lowest level since March 2021. While this indicates some positive developments, Powell cautioned that reducing inflation to the desired level would require slowing down economic growth below its trend rate. He also stressed that future rate decisions would be based on incoming data and evaluated on a meeting-by-meeting basis, rather than adhering to a predetermined course.

Regulatory Practices and Banking Turmoil

In his remarks, Powell briefly touched upon the banking turmoil experienced earlier in the year. He emphasized that the episode served as a reminder of the importance of appropriate supervisory and regulatory practices. The Fed is committed to ensuring the stability of the financial system and will continue to evaluate and adjust its regulatory framework as needed. Powell's acknowledgment of the banking turmoil highlights the Fed's dedication to maintaining a resilient financial sector and underscores the interconnectedness between monetary policy and financial stability.


Source:

  • https://www.cnbc.com/2023/06/21/powell-expects-more-fed-rate-hikes-ahead-as-inflation-fight-has-a-long-way-to-go.html

Filed Under: Economy, Financing, Mortgage, Trending News Tagged With: Fed Chair, Fed Rate, Fed Rate Hike, Federal Reserve, Interest Rate Hikes

Is the Fed’s QE3 Good for the Housing Market?

September 25, 2012 by Marco Santarelli

Last week, the Federal Reserve announced a new round of “quantitative easing,” or QE3, meaning the Federal Reserve will  fire up the printing presses to buy $40 billion worth of  mortgage-backed securities (MBS) every month on an open-ended basis in an effort to further drive down historically low interest rates.

Federal Reserve Chairman Ben Bernanke said QE3 should put downward pressure on mortgage rates, helping the housing market.  By lowering borrowing costs and spurring  banks to lend more, the Fed hopes to induce more spending and eventually set  the stage for more hiring.  The Fed tied its bond-purchase program explicitly to jobs, saying it will keep buying bonds until it sees a substantial improvement  in the labor market.

Who benefits from QE3?

[Read more…]

Filed Under: Economy, Financing, Housing Market, Real Estate Investing Tagged With: Economy, Federal Reserve, Financing, Housing Market, Mortgage-Backed Securities, QE3, Real Estate Investing, rental property

Ben Bernanke: "Dumbass of the Decade?"

January 22, 2010 by Marco Santarelli

Ben Bernanke, "Time Magazine’s Man of the Year".

How about “Dumbass of the Decade?”

You just can’t make this stuff up! This choice by Time Magazine displays the collusion between the government and the main stream media. Bernanke as "Person of the Year" is almost as bad as President Obama receiving the Nobel Peace Prize.

I believe in the next year or so it will become apparent to all the "sheeple" out there, who just gobble up all the BS from the main stream media as the truth, that Ben Bernanke is actually "Dumbass of the Decade" instead of "Man of the Year" when everyone realizes what he actually did with our money. The only true way to find out what he did is to audit the Fed. Unfortunately, if the Fed were audited today we would probably have another stock market crash when everyone realizes where all the money went to.

The Dumbass Bernanke Timeline:

[Read more…]

Filed Under: Economy Tagged With: Ben Bernanke, Economy, Fannie Mae, Federal Reserve, Freddie Mac, Man of the Year, Real Estate Investing, Time Magazine

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