The Federal Reserve is under pressure from market commentators and former officials over its policy decision next week. Concerns have grown that cutting rates too quickly could lead to a resurgence of inflation, despite robust economic growth and low unemployment. Investors see nearly a 100% chance of a quarter-point cut at the upcoming meeting.
Former Fed President Richard Fisher has expressed skepticism about trimming rates this month, citing high inflation and strong economic growth. He said financial conditions are “very accommodative” and noted that adding jobs to employment numbers could prompt him to suggest pausing rate cuts.
Former Fed Governor Frederic Mishkin warned that cutting interest rates with inflation above target could produce a harmful setup for the economy. Economists also fear that an early rate cut could reignite inflation and lead to stagflation, a situation where growth is sluggish while prices remain high.
Despite these warnings, markets are pricing in a nearly 100% chance of another quarter-point cut at next week’s meeting. However, odds for pausing rates in January have increased, with markets now giving just a 17% chance of another move down.
Source: https://www.businessinsider.com/fed-rate-cut-outlook-fomc-meeting-inflation-interest-rate-policy-2024-12