The Federal Reserve of USA is “fully conscious” of the challenges that inflation poses to the economy and is “firmly committed” with its target of 2% price increases, the central bank said on Friday in its latest semi-annual report to Congress on monetary policy and the economy.
While largely a retrospective summary of economic developments and the Federal Reserve’s policy meetings, the report offers some indication that the central bank expects consumer spending growth to soften as As the year progresses and households consume the savings from the pandemic.
“Household spending fundamentals (…) appear to be somewhat less supportive of spending growth”said the report, noting that even with wages rising at a robust pace, the influence of rising prices and the end of the pandemic and other transfer payments meant inflation-adjusted after-tax income fell by 1.4 % in 2022.
Consumer confidence “it is still very low”, according to the report.
But overall, the report reiterated the themes that now dominate the Fed debate: a labor market “extremely tight”economic growth that probably needs to slow down, a financial system that has absorbed rate hikes largely smoothly, and inflation that, despite everything, is holding up. “well above the target of the Federal Open Market Committee (FOMC)”.
“In response…the FOMC continued to rapidly raise interest rates and reduce its security holdings,” says the report, and also “anticipates that continued increases in the target range will be appropriate.”
Federal Reserve Chairman Jerome Powell will discuss the report and Federal Reserve policy in two consecutive appearances before Congress next week, on Tuesday and Wednesday.
Source: Reuters
Source: Gestion
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