Economic Insights Newsletter

Fed Raises Rates Again in December

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Chair Jerome Powell said the policymakers are not close to ending its anti-inflation campaign of interest-rate increases

Fed officials raised their estimates for the main and core readings of their preferred inflation gauge, the index for personal consumption expenditures (PCE). They now see PCE at 3.1% in 2023 compared with a September estimate of 2.8%, while core — which excludes food and energy — may be 3.5% for next year. During the 3Q22 the PCE stood at 6.3%.

Officials are seeking to slow growth to below its long-term trend to cool the labor market — with job openings still far above the number of unemployed Americans — and reduce pressure on prices that are running well above their 2% inflation target. Wage growth still stands at 5.1%, which creates more buying power for workers fueling inflation. Powell has stated that he willing to allow for the economy to suffer some pain to lower inflation and avoid the mistakes of the 1970s when the Fed prematurely loosened monetary policy allowing inflation to flourish.

Written by Daniel Morgan, Senior Portfolio Manager

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