Fed Brad: The Fed should only slow down the rate increase when it reaches the terminal interest rate
It is reported that the Federal Reserve Brad said that the Federal Reserve should slow down (increase interest rate) only when it reaches the terminal interest rate, and the market may overestimate the risk of economic recession in 2023. The US economy is stronger than expected. The Federal Reserve will have to raise the interest rate to more than 5% to curb inflation. The layoffs in Silicon Valley will have no impact on the overall strength of the labor market. It is expected that the terminal interest rate will reach 5.375%. The US economy is more resilient than the financial market predicted.
Interpretation of this information:
The Federal Reserve has communicated that they should only slow down the rate at which they raise interest rates when they reach the so-called terminal interest rate. This means that the market may be overestimating the risk of an economic recession in 2023. The US economy is proving to be stronger than expected, going against predictions that the rate of growth would slow down. The Federal Reserve sees the need to raise interest rates to more than 5% in order to combat inflation. Despite recent layoffs in Silicon Valley, the overall US labor market remains strong. The Federal Reserve expects the terminal interest rate to reach 5.375%, a level that is likely to have significant impacts on the economy.
This message carries two main points. The first suggests that the US economy is performing better than expected, meaning that the previously predicted slowdown in growth may not be as significant as thought. This point is reinforced by the statement that the layoffs in Silicon Valley will have no impact on the overall strength of the economy. The second point is that the Federal Reserve is prepared to take action to stem inflation, indicating that they may look to raise interest rates to over 5%. The prediction of a terminal interest rate, one that the Federal Reserve will stop raising interest rates at, is key to this message. The suggestion that this rate could be as high as 5.375% highlights the severity of the situation and the steps that the Fed is willing to take.
The three keywords that summarize this content are: terminal interest rate, inflation, and strength of the US economy.
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