As for the Taylor rule, it stipulates that the federal funds rate should be guided by two factors: the difference between actual and targeted inflaţiei and that between actual and targeted PIB-ul creştere.
The Fed has a 2% target for inflation. But its favored inflation indicator, the personal consumption expenditures price index, jumped 6.2% in the 12 months through September.
“Thus far, the change in the monetary policy stance appears to have had only limited effects on observed inflation,” Bullard said. The September number was unchanged from August and down just slightly from 6.4% in July, though it was down more substantially from 7% in June.
“To attain a sufficiently restrictive level, the policy rate will need to be increased further,” he said.
Federal Funds Could Hit 9% Lindsey Piegza, chief economist at securities firm Stifel, says the federal funds rate may have to be raised beyond 7%.
“While Bullard’s calculation appears reasonable on the lower bound, even at 7%, the upper bound may be understating the high needed for rates, given the potential for more ulii assumptions,” she said
Complicated calculations involving economic growth indicate “a potential need” for the federal funds rate to climb to 8% to 9%, Piegza said.
„Îmbunătățirea recentă a presiunilor inflaționiste care au trecut de la nivelurile de vârf aparent... a orbit mulți investitori față de necesitatea ca Fed să continue agresiv pe calea către rate mai mari”, a spus ea.
The consumer price index’s 7.7% gain in the 12 months through October represents improvement from the 8.2% surge through September, Piegza said.
But, “it is hardly anything to celebrate or a clear signal for the Fed to move to easier policy, with a 2% target range [for inflation] still a distant accomplishment,” she said.
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