Bostic explained that monetary policy can assist in creating favorable conditions for sustaining economic expansions. Furthermore, he pointed out that policy could contribute to better labor market outcomes for individuals located at the fringes of the economy and on the short end of wealth inequality.
The Fed’s Interest Rate Policy
Fed officials have raised interest rates by more than 5 percent since March 2022 and have indicated a tendency to maintain the policy next month. Fed Chairman Jerome Powell also expressed that policymakers are proceeding with caution.
High Borrowing Costs and the Impact on Monetary Policy
Dallas Fed President Lorie Logan, on the other hand, mentioned that recent data and the high borrowing costs have provided room for considering the next move in monetary policy for the Fed. Referring to the tightening financial conditions, Logan stated that they have some time before making the decision to either raise or maintain interest rates.
Inflation and Employment Balance: The Fed’s Challenging Task
Logan acknowledged that progress has been made in reducing inflation, but she expressed uncertainty about how much the price pressures have decreased toward the Fed’s 2 percent target. She also mentioned that the strong labor market might need to weaken further to help the Fed achieve its inflation goals.
The Future of Monetary Policy: Tightening and Financial Conditions
Logan also emphasized that it is possible to alleviate the pressure on monetary policy from the markets. However, she underlined the importance of evaluating how well the economy aligns with a robust outlook and assessing the associated risks when making this decision.
“Benim odak noktam fiyat istikrarı ve görevimizi yerine getirmek için daha fazla sıkılaştırmanın gerekip gerekmeyeceği.”Fed Başkanı Lorie Logan
Furthermore, Logan stated, ‘If tighter financial conditions persist, this could somewhat reduce the need for further increases.”
You can access Fed Chairman Powell’s interest rate and economic assessment as of October 19, 2023, from this link.