ECONOMYNEXT – The Federal Reserve has held rates but said unemployment has started to move up, and that the committee “is attentive to the risks to both sides of its dual mandate” indicating that it is close to cutting rates.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the Federal Reserve said in its open market operations statement.
“Job gains have moderated, and the unemployment rate has moved up but remains low. Inflation has eased over the past year but remains somewhat elevated.
“In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.”
The Fed is keeping short term rates at its target of 5.25 to 5.5 percent, and will continue to sell down its Treasury bill and mortgage-backed securities it bought to print money and trigger inflation and commodity and asset price spikes especially in the Covid period.
Fed triggers global inflation and instability including the collapse of the Bretton Woods, the Great Inflation of the 1970s, the housing bubble and most recently the inflation spike using its central bank independence and embracing a so-called dual mandate driven by the belief that it can print money and reduce unemployment.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the statement said.
“The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”
Classical economists have warned that the US broad money has been contracting in absolute terms, which has rarely happened and a recession is ‘baked in the cake’.
There have also been concerns that the US may end up in a ‘hard-landing’ particularly as its government debt is starting to look unsustainable after sustained stimulus and quantity easing and anemic growth.
Data also show that commercial bank credit has slowed sharply since the bank failures of early 2023, and some banks are collecting liquidity to brace themselves for any shocks.
The full statement is reproduced below:
Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have moderated, and the unemployment rate has moved up but remains low. Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.