September signals continue on the Fed front

Former and new Fed officials have made statements regarding forward-looking monetary policies. Boston Fed President Susan Collins emphasized that policymakers should evaluate economic data and be patient when making decisions, while former St. Louis Fed President James Bullard said members should reflect an additional rate hike for this year in their expectations to be released at the end of this month. Collins said, “This phase of our policy cycle requires patience and holistic data evaluation while maintaining our path. While we are near or even at the peak in policy rates, further tightening may be necessary depending on incoming data.” Bullard also assessed that it would be “wise” to keep an additional rate hike among the estimates known as “dot plots” “from a risk management perspective.” On the other hand, a study prepared by two Chicago Fed economists and published on the institution’s website predicted that the Fed’s 5.25 percent rate hike in the last 18 months could be sufficient to reduce inflation to the US central bank’s 2 percent target and avoid a recession. “The policy tightening that has already been implemented, according to the model’s prediction, is sufficient to bring inflation closer to the Fed target by mid-2024 and prevent a recession,” the study prepared by Stefania D’Amico and Thomas King said.