Updated: Aug 10
By Wong Kon How
The Fed hike another 0.25% on 26 July 2023. They are trying to engineer a ‘soft landing’ by snuffing out inflation while avoiding a recession.
1. No recession expected:
Powell believes a "soft landing" is possible, with no current recession in the cards. Fed staff no longer forecasts a recession due to the economy's resilience.
2. No rate cut plans yet:
Powell is not considering rate cuts anytime soon, and no clear criteria for rate cuts have been provided. A rate cut might be possible next year if inflation stays consistently near the 2% target.
3. Decisions on next hike, pause or cut:
The Fed's interest rate decisions are also influenced by GDP and spending data, in addition to inflation. Retail data shows continued spending growth, and despite risks, the economy is still expanding.