Powell Opens Door to Aggressive Rate Hikes. Will These Economic Data Lead to a Reversal?
The Federal Reserve will need to raise rates to higher levelsthan previously anticipated to prevent inflation from picking up if the recent strength in hiring and consumer spending continues, a central bank official said Thursday.
"Nothing about the data suggests to me that we've tightened too much," Mr. Powell said. "Indeed, it suggests that we still have work to do."
But recent data have suggested the economy might be cooling,
The latest BAC card spending data suggest that the acceleration in consumer spending might have been more short-lived than we were expecting. Card spending per household slowed to 1.3% y/y in the week ending Feb 25"
In addition, the U.S. Labor Department's job openings report may not be capturing a recent upturn in layoffs, according to Manuel Abecasis, a Goldman Sachs economist. Abecasis says that based on December and January Worker Adjustment and Retraining Notification Act notices from the seven big states (California, New York, Texas, Florida, Pennsylvania, Virginia and Ohio), the layoff rate is around 1.1%, higher than the 0.9% layoff rate in the November JOLTS report.
Granted, a 1.1% layoff rate is still historically very low. But the upturn is significant for Federal Reserve policymakers, who say that the jobs market remains too tight.
Furthermore, In the US, the spread between 2- and 10-year yields are showing a discount larger than a percentage point for the first time since 1981, when then-Fed Chair Paul Volcker was pushing through hikes to tackle double-digit inflation. The yield inversion indicator has over the decades anticipated recessions in the wake of aggressive Fed tightening campaigns.
Mooers, do you think the Fed has tightened too much?
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101814969 : Concentrating just on consumers spending and job market may not be answer to the current economics situation in the US.
Other crucial factors in the overall economy should be tackled as a whole including US dollar, debts, deficits and government spending.
I think that The Fed is not doing enough in this sense although tightening helps albeit less aggressively.
Just my thinking. Any comments is welcome
S123456 : Interest rate hikes can't reduce inflation at all. All aspects of labor and materials are rising. Inflation is 2. Unrealistic, is it useful to add so much?
WinningTrader 101814969 : The Fed has all the subject matter experts and analyst yet not doing enough and the right things. They are only talking and increasing interest rate. Just makes me feel all is child's play and makes no sense.
bananarama : when did he ever close the door to rate hikes. stop being a fear mongling porn star.
Olmec : They need to cut government spending too that will help
S123456 : Stop sending money and lower tariffs