ALBAWABA – The United States (US) Federal Reserve is on track with US inflation and the Fed will avoid recession, a senior official on the bank's rate-setting committee said Tuesday.
Having hiked the key US interest rate to a 22-year high in the battle against sticky inflation, the Fed recently slowed down the pace of its hikes, saying policy changes need to be data-dependent.
Consumer inflation has fallen sharply since the campaign began in March 2022, Agence France-Presse (AFP) reported. But it remains stuck above the Fed's long-term target of two percent, maintaining the pressure on policymakers.
"We feel like we're on track for a soft landing," Minneapolis Fed President Neel Kashkari told a conference in North Dakota.
A soft landing refers to tackling US inflation while avoiding a recession.
US inflation is coming down - Shutterstock
"Inflation has come down quite a bit, the labor market has remained strong, maybe we can get inflation all the way back down” while “avoiding a deep recession," he said.
Kashkari also engaged with recent comments from Dallas Fed President Lorie Logan.
The Dallas Fed chief said elevated long-term interest rates could mean there is "less need" for another rate hike, especially as yields on the 10-year US Treasury recently rose to a 16-year high.
Higher yields on longer-term notes, AFP explained, feed into increased consumer borrowing costs, which can act to constrain economic activity and reduce the rate at which prices increase.
"It's certainly possible that higher long-term yields may do some of the work for us" in terms of bringing US inflation back down, Kashkari said Tuesday.
However, he warned that if yields rose due to a change in expectations about Fed policy, the US central bank "might actually have to follow through on their expectations in order to maintain those yields".
"So it's a little bit circuitous, and it's hard for me to say definitively, 'hey, because they've moved therefore we don't have to move,'" he added.
