In 2022, the Fed began with front-loaded interest rate increases and is now looking forward to rate cuts, yet remains cautious. January data did not provide what crypto investors were hoping for. Although the decrease in inflation is slowing, it continues, and the importance of February’s inflation and employment data in March is extremely high.
Fed Monetary Policy Report
The Fed has just released its latest monetary policy report. It mentions that despite a significant slowdown in US inflation, the figures continue to remain high. Throughout the week, the majority of the members who made statements preferred to remain cautious, focusing on the risk of a slowdown in the decline of inflation.
Some notable details in the monetary policy report include:
- US inflation has slowed down significantly but continues to trend high.
- Wage increases slowed in 2023 but remain above the pace consistent with 2% inflation.
- The labor market continues to be relatively tight, demand decreased, supply tends to rise.
- Inflation expectations are generally in line with the 2% target.
- The 6-month core PCE increased annually by 2.5%, short-term measured inflation can exaggerate unique, temporary factors.
- It is not appropriate to lower the target range until there is more confidence that inflation is sustainably moving towards 2%.
- High interest rates, tighter insurance, zoning, and other regulations have restricted housing supply.
- Risks towards achieving the Fed’s goals are becoming more balanced, Fed continues to be extremely cautious against inflation risks.
- A strong labor market, work-from-home, and cash payments limited the impact of high interest rates by supporting housing demand.
- The potential rapid adoption of new technologies such as artificial intelligence and robotics could increase productivity growth beyond the current moderate pace in the coming years.
- Softening in rents indicates that the slowdown in housing service prices will continue next year.
- Ongoing softening in labor demand and improvements in labor supply will contribute to further slowing of core service price inflation.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.
