Fed: US growth was “extraordinary” and we must pay attention to it

The governor of the Federal Reserve, Christopher Wallersaid on Tuesday that the economic growth of USA in the third quarter, with an annualized rate of 4.9%, was a result “extraordinary” which deserves to be watched as the Federal Reserve considers its next monetary policy measures.

“It has been an extraordinary quarter, a spectacular figure”Waller said at an economic data seminar at the St. Louis Federal Reserve. When analyzing the components of US production, “Everything was booming. “So this is something we are watching very closely as we think about monetary policy going forward.”.

US central bank officials, including Fed Chair Jerome Powell, have said they believe the US needs a period of moderate economic growth for inflation to cool from the current level of around 3.4%, based on the Fed’s preferred measure, to the target of the 2% of the central bank.

Many economists and investors believe an economic slowdown is likely, and generally expect the Federal Reserve to keep interest rates steady at its Dec. 12-13 policy meeting.

Waller, who has been one of the most ardent advocates of the Federal Reserve’s aggressive interest rate hikes to combat high inflation, did not include any recommendations in his comments.

However, he noted that, after a streak of “amazing” job growth, “the labor market is cooling a little (…) It is clearly calming down”with recent job growth more in line with levels seen before the coronavirus pandemic, an evolution that Federal Reserve policymakers also consider necessary to return inflation to the target of the 2%.

The Federal Reserve is weighing this and other data to determine whether it will be necessary to raise its benchmark overnight interest rate beyond the current range of the 5.25%-5.50%, which he set in July.

Rising long-term bond yields have led some Federal Reserve officials to think that credit conditions may be tightening enough that the central bank no longer needs to raise its own official short-term interest rate. .

Speaking separately to CNBC on Tuesday, Chicago Federal Reserve President Austan Goolsbee noted that inflation has slowed and that rising market interest rates, “if (…) it remains at high levels”probably represents a tightening of credit conditions.

“So we have to take that into account (…) We should expect to see that with a delay making its way into the economy. “So we are all paying attention and trying to figure out what is the determining factor,” Goolsbee said.

The Federal Reserve’s current caution about further rate hikes has been reinforced by rising bond yields and rising market interest rates.

But neither Goolsbee nor Minneapolis Fed President Neel Kashkari, who spoke to Bloomberg Television on Tuesday, ruled out further Fed rate hikes.

Pointing, as Waller did, to recent “hot” readings on economic activity, Kashkari said “that makes me question whether monetary policy is as restrictive as we assume it is currently.”

“If inflation were to rise again and economic activity remained very strong on the real side of the economy, that would tell me that perhaps we would have to do more”Kashkari added.

Source: Reuters