President Joe Biden touts his administration's actions to invest in American industries like manufacturing in a speech from Arizona.by CHRISTOPHER RUGABER | AP Economics WriterFederal Reserve Board Chair Jerome Powell speaks during a news conference about the Federal Reserve's monetary policy at the Federal Reserve, Wednesday, Dec. 13, 2023, in Washington.
The Fed's policymakers also expect "core" inflation, which excludes volatile food and energy costs, to still be 2.6% by the end of 2024, up from their previous projection of 2.4%. In January, core inflation was 2.8%, according to the Fed's preferred measure. When the Fed raises its benchmark rate above the neutral rate, it seeks to slow growth and tame inflation. If the neutral rate is actually higher than the Fed had thought, it means its key rate should be higher, too, to cool the economy and inflation.
Chair Jerome Powell and the 18 other officials on the Fed's interest-rate-setting committee have been considering how — or whether — those figures should affect their timetable for cutting rates. The central question is whether they have kept rates high enough for long enough to fully tame inflation.
At the same time, the central bank faces a competing concern: If it waits too long to cut rates, a long period of high borrowing costs could seriously weaken the economy and even tip it into a recession.
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