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Economists Say the Fed's

Economists Say the Fed’s Current Monetary Policy is Too Tight. Economists assess that the United States (US) central bank, the Federal Reserve (The Fed), has been too tight in maintaining its monetary policy, the tightest since mid-2010.

The results of a National Association for Business Economics poll showed that 21% of respondents thought the US central bank’s monetary policy was too restrictive. Of note, these results were published ahead of NABE’s annual economic policy conference in Washington, convening January 23-30, 2024.

It is known that Fed officials have increased their benchmark interest rate by more than five percentage points between March 2022 and July 2023. During this time, there was the fastest tightening cycle since the early 1980s.

Economists Say the Fed’s Current Monetary Policy is Too Tight. Inflation then sloped rapidly in the second half of 2023, increasing market expectations that Uncle Sam’s central bank would cut interest rates in early 2024.

Then at the January 2024 meeting, Fed Chair Jerome Powell and his colleagues chose to maintain the benchmark interest rate and signaled that March 2024 might not be the starting point for lowering interest rates. Investors then bet that easing would begin in May 2024.

Powell also said that economic growth and a strong labor market were reasons why the Fed needed to take time before rolling back tightening measures. Meanwhile, the monthly employment report published on February 2 2024 shows that job creation in 2023 was revised higher.

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