Hammack is out with a statement on her dissent.
The US economy is in a good position, but there is more work to do on
inflation. Economic growth has been strong, and the labor market is
healthy. Broad measures of financial conditions have eased, and business
sentiment remains robust. Monetary policy has played an important role
in bringing PCE inflation down considerably from its peak of 7.2 percent
in the summer of 2022. Despite these positive developments, inflation
remains elevated, and recent progress in returning inflation to 2
percent has been uneven.
Given the health of the labor market, it is important to maintain the
focus on returning inflation to 2 percent in a timely fashion. To
accomplish this objective, I believe that monetary policy will need to
remain modestly restrictive for some time. Based on my estimate that
monetary policy is not far from a neutral stance, I prefer to hold
policy steady until we see further evidence that inflation is resuming
its path to our 2 percent objective. In my mind, maintaining the target
range for the federal funds rate at 4-1/2 to 4-3/4 percent at the
December 2024 meeting was the best choice given the strength of recent
economic data, accommodative financial conditions, and my forecast that
inflation will remain somewhat above 2 percent over the next year amid a
healthy labor market. The economy’s momentum and recent elevated
inflation readings caused me to revise up my inflation forecast for next
year. In addition, the balance of risks to the outlook appears to be
skewed toward higher inflation outcomes. A stall in inflation above 2
percent for too long would risk de-anchoring inflation expectations,
making it harder to return inflation to our objective.
I viewed my own decision as a close call, and I appreciate the
diverse perspectives that my FOMC colleagues brought to our robust
discussion. I look forward to continuing to collaborate with my FOMC
colleagues in service to the American public as we seek the best course
for monetary policy to achieve our dual mandate objectives of maximum
employment and price stability.
This article was written by Adam Button at www.forexlive.com.
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