United States | Rates must remain high, even if the economy slows ‘significantly,’ according to the Fed

(Washington) “Higher, longer” remains in summary the idea retained by the American Central Bank (Fed), which estimates that its rates must remain high for a while, even if it expects a clear slowdown in the American economy in the last quarter.

“All” Fed officials thus estimated that “it would be appropriate to maintain a restrictive (monetary) policy for a certain time” in order to ensure that inflation comes close to its target of 2%. , according to the report, or “minutes,” of the Fed’s last meeting, October 31 and 1^er November, published Tuesday.

The Fed’s Monetary Policy Committee had, during this meeting, kept rates in the range of 5.25 to 5.50%, for the second consecutive session, a position which should persist at the final meeting of the year on December 12 and 13, according to the survey carried out by CMEGroup.

After 11 increases since March 2022, and rates which have, in total, increased by more than 5 percentage points, they have now reached their peak, or almost, even if the President of the Fed, Jerome Powell, has not not closed the door to a further increase.

The Fed Monetary Policy Committee (FOMC), however, seems to be less affirmative than at the end of the previous meeting, simply considering itself “ready to adjust the direction of monetary policy if risks emerge that could call into question » achieving the 2% objective.

The FOMC also repeats what most of its members have already explained: the next decisions will be taken according to the evolution of macroeconomic indicators.

In this case, Fed economists also anticipate a clear slowdown in the American economy in the last quarter, after a third quarter which saw growth accelerate on the contrary.

Due to the lag in monetary policy, they also anticipate “growth slower than potential growth for the next two years”, before returning to a closer pace in 2026.

Inflation fell to 3.2% in October year-on-year, according to the CPI index published on Tuesday, compared to 3.7% in September. The Fed favors another measure, the PCE index, which will be published on November 30.