Fed meets this week to assess inflation fight
The Federal Reserve’s Open Market Committee gathers on Tuesday and Wednesday for its final huddle of the year. In its previous two meetings, the central bank kept its benchmark interest rate at 5.4% — a 22-year high.
The Fed governors will have a lot of data to chew on to figure out how much more time and vigilance might be needed to bring inflation down to their long-term target of 2%.
Whatever the Fed governors think about their inflation fight, consumers appear to have decided they’ve won.
“All demographic groups are in agreement that inflation is going to slow down in the year ahead,” said Joanne Hsu at the University of Michigan Consumer Surveys.
That’s one reason sentiment shot up in December; another reason can be seen in the strong December jobs report.
“Consumers feel fairly confident about the growth of their incomes over the next year. That’s one of the reasons why consumer spending has remained so robust,” Hsu said.
All of that could alarm the Fed, which worries bigger paychecks and more spending might actually spark an inflation rebound, noted Quincy Krosby at LPL Financial.
“With consumer sentiment climbing higher, wages inching up ever so slightly, and the unemployment rate coming down, the Fed may add a little bit more hawkishness into its statement,” she said.
Still, Krosby added that no one expects the Fed to hike rates again at this week’s meeting.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
