The Fed shows confidence in the economic recovery and fears of recession fade

Those responsible for the Federal Reserve (Fed) are increasingly optimistic about their ability to appease inflation without causing serious economic damage.

Supported by indications that pressure on prices and the labor market are gradually coolingFed officials are determined not to miss the opportunity to achieve “soft landing“raising too much interest rateseven though they maintain their commitment to return inflation to your goal Of 2%.

With this in mind, policymakers are preparing to keep rates steady at their meeting on September 19-20, and could raise them once again if necessary this year, amid a string of strong economic data, according to analysts at the agency Bloomberg.

However, Jerome Powellpresident of the Fed faces an unprecedented challenge: return to price stability without generating a recession. A rare achievement in modern economic policy, maintains the aforementioned agency.

Since March 2022, The Federal Open Market Committee raised the reference rate 11 times of federal funds, reaching between 5.25% and 5.5%, the highest level in 22 years.

Interest rates: the data the Fed follows

However, several officials of the US central banks, including the Powellhave made it clear that, as they approach the end of the hike cycle, They will proceed very carefully and they will take it very seriously the data to determine if further adjustments are necessary.

In context, it takes utmost importanceto recent data and those to come. This week, reports offered some assurance that inflationary tension is dissipating.

The Federal Reserve’s favorite measure to measure underlying pressures on prices recorded the smallest consecutive increases since the end of 202, according to the report from the Office of Economic Analysis. The underlying price index for personal consumption expenditures rose 0.2% in June and July, compared to an average of almost 0.4% in the first five months of the year.

Likewise, the report of the work Department revealed that employment gains in June and July were much weaker than previously reported, that the unemployment rate rose and wage growth slowed. This shows signs that The cooling of the labor market is happening as the Fed expects.

Next Wednesday, before the Fed meeting September, they will be announced new consumer price data for Augustwhich will be a key indicator of inflation.

Investors are eagerly awaiting the Federal Reserve don’t raise interest rates at that meeting, but the odds of a 25 basis point hike at the October-November 1 meeting are virtually the same.

However, it is not ruled out that those responsible for US monetary policy, with data in hand and during the September meeting, will make one more increase in the remainder of 2023, probably ahead of the November meeting.