Fed Vice Chair Lael Brainard said on Thursday that “logic” still applied as the central bank “probed” how much further to raise rates in an environment where inflation appears set to slow and the economy may be weakening.
The personal consumption expenditures price index, the Fed’s preferred measure of inflation, increased at a 5.5-percent annual rate in November, down from the June high of 7 percent but still far above the central bank’s 2 percent target. Consumer prices rose at an even faster 6.5 percent pace in December.
Officials will not issue new projections at the upcoming meeting, so any shift in emphasis would need to come through the policy statement, which will be released at 2 p.m. EST on Feb. 1. Powell will start speaking half an hour later. Fed officials were surprised in 2021 by the persistence of inflation that at one point was more than triple their 2 percent target. They spent last year trying to catch up by raising interest rates, and now seem biased in favor of doing too much to restrain the pace of prices rather than doing too little out of fear of damaging the jobs market and economic growth.
U.S. retail sales in December were a disappointment. Industrial production, a broad measure of factory output for which peaks and declines are seen as possible evidence of a coming recession, passed its pre-pandemic high point last year but then fell sharply in November and December.