Quiver Quantitative - Federal Reserve officials Thomas Barkin and Raphael Bostic have highlighted that the full impact of the Fed's recent rate hikes has yet to manifest in the U.S. economy, implying that further economic deceleration is on the horizon. While speaking in New Orleans, both agreed that the effects of the policy changes are still unfolding. Despite the robust growth indicators from the previous quarter, Barkin, known for his hawkish stance, suspects a looming slowdown which he deems necessary to temper inflationary pressures.
The Fed's current policy rate, sitting between 5.25% and 5.5%, is at its highest in over two decades, and the central bank has paused rate adjustments in its last two meetings. Market participants, guided by futures, are not anticipating additional rate hikes. Fed Chair Jerome Powell's upcoming remarks at an IMF-sponsored conference are much awaited for further guidance on the Fed's monetary stance.
Bostic, typically more dovish, considers the current policy sufficiently restrictive to address economic challenges but forewarns of potential 'bumps' ahead. He remains adamant that the Fed will maintain its restrictive policy until there is assurance of inflation returning to the 2% target. This approach aligns with the Fed's commitment to price stability, despite the near-term economic headwinds it might bring.
Barkin's observation of a not-so-vibrant economy, despite positive data, signals caution and readiness for what he believes will be necessary economic moderation. This could signal a strategic patience in monetary policy, as the Fed evaluates the need for future rate hikes. Both officials' comments contribute to the ongoing debate over the trajectory of U.S. economic policy amidst persistent inflation.
This article was originally published on Quiver Quantitative