Comment: The Federal Reserve step by step to keep the rare soft landing opportunity

Source: Bloomberg

Fed officials are becoming more and more optimistic, and they feel that they can calm down inflation without causing serious economic bitter fruits.

Under the inspiration of the price pressure and labor market, the Federal Reserve officials have no intention to waste the opportunity to "soft landing" because of excessive interest rate hikes, although they are still committed to restoring the inflation rate to the target of 2%of the 2%targetEssenceIn view of this, the decision makers are preparing to maintain interest rates when their meetings on September 19-20, and in the context of a series of strong economic data performance, if necessary, this year may raise interest rates again.

This balanced art is important for the results of Chairman Powell: After a large -scale inflation impact, if you can restore the stability of prices without experiencing economic recession, it will be a rare achievement in the history of modern decision -making. Perhaps it can calm down the outside world.Regarding its criticism of prices too late.

"Perhaps soft landing is really possible," Ellen Meade, a senior consultant of the former Federal Reserve Council and a research professor at Duke University.

"They don't want to convey their excitement, because the financial market will destroy everything they do," she added.

After a few times after the inflation slowdown, the decision makers are cautious about the end of the premature announcement of credit tightening operations, and they may tend to maintain higher interest rates for a period of time.

Since March 2022, the Federal Open Marketing Committee (FOMC) has raised interest rates 11 times to adjust the interest rate of the benchmark federal fund to 5.25%-5.5%, the highest level in 22 years.Officials, including Powell, have emphasized that as the radical interest rate hike cycle is approaching, they will do cautiously and rely on data to determine whether they need to raise interest rates further.

This means that the upcoming data is important, and whether the official will increase the interest rate to the limited level that has been reached.

"Our monetary policy is good," the New York Federal Reserve Governor John Williams said on a event held at the Bloomberg LP New York headquarters on Thursday.

The data in recent weeks has also made people believe that inflation is being affected.

The data released last week showed that the basic price pressure index that the Fed valued was recorded by the smallest continuous single -month increase since the end of 2020.

Another report released by the US Department of Labor last week showed that employment growth in June and July was repaired, the unemployment rate rose, and wage growth slowed down.

The outspoken Eagle Federal Reserve director Christopher Waller said the data of this week was very good.

"No data indicates that we need to take action immediately," Waller said in an interview with CNBC on Tuesday, which shows that he supports the Federal Reserve to maintain interest rates at the next meeting.He said: "We can observe its changes and wait for the data."

Before the meeting in September, another important inflation data will be ushered in next Wednesday, that is, the consumer price index in August.

In view of the risk of insufficient confidence in forecasting, high inflation rate, and the overall growth of the trend level, the middle schools such as Waller and Dallas Federal Reserve, Lorie Logan, and Boston Federal Reserve Susan Collins have retained this nightThe possibility of interest rate hikes.

However, LOGAN sounds more balanced, saying that decision makers "must step by step."

"FOMC cannot prevent inflation from re -igniting, and pour cold water to cool the economy in a barrel one bucket," she said at Dallas on Thursday."If we do this, not only inflation, but also the economic activities itself will be 'cooling' soon, and this is not the result we want."

Investors expect Fed officials to not raise interest rates this month, but from October 31st-November 1st, the possibility of raising interest rates by 25 basis points is roughly 50%.

Decision makers will submit the latest economic forecast at the September meeting, which may show a wide consensus on this year.

Fed officials said that in order to achieve soft landing, they need to see the labor market and overall demand to slow down.

After a series of data such as consumer expenditure and residential investment is stronger than expected, economists have been raising their predictions on the domestic GDP.

From the perspective of the Federal Reserve's policy, the slowdown in Europe and China may be conducive to the slowdown of inflation in the next few months.

"It consolidates the situation that is more favorable for product inflation," Michael Feroli, chief American economist at JP Morgan Chase, said when Chinese economy slows down.

The prediction of US economic growth also shows that the output value will slow down in the next three months.

"Our forecast is a significant slowdown in growth," said Jonathan Millar, a senior economist of Barclays, said that it is expected that from 10 to December, the annualized growth rate will be reduced to 0.5%.Even so, "The strong GDP growth has repeatedly surprised us."

This is actually a challenge facing the Fed.It has insufficient confidence in its own prediction, and it has to retain further tightening options when inflation is still too high.Millar said that further restrictions may take away the "rare" soft landing in history.

Millar said that when suppressing inflation, "the Fed is often excessively tightened" and the economy has fallen into a decline.This time, officials were determined to avoid making such mistakes.