VIDEO: Data Doesn't Support Big Action by Fed

Fed's Data Doesn't Call For Big Action

Recent data doesn't back raising interest rates multiple times this year, says the St. Louis Fed President James Bullard.

Although inflation is a concern, the economy may not be strong enough to withstand multiple rate increases in 2023.

Bullard wants to wait and see more economic data before the Fed takes any drastic actions.

Bullard's Reasoning

Inflation

Bullard notes that inflation has moderated in recent months.

The Fed's preferred measure of inflation, the core PCE price index, rose 4.7% in November, down from 5.5% in June.

While inflation is still above the Fed's target of 2%, it is moving in the right direction.

Economic Growth

Economic growth is also a concern.

The U.S. economy grew at an annual rate of 2.9% in the third quarter of 2022, down from 6.9% in the second quarter.

The Fed is worried that raising interest rates too quickly could slow economic growth even further.

Labor Market

The labor market is another factor that the Fed is considering.

The unemployment rate is currently at 3.5%, which is near a 50-year low.

The Fed is reluctant to do anything that could jeopardize the strong labor market.

Conclusion

Bullard's comments suggest that the Fed may be more cautious than expected in raising interest rates this year.

The Fed will likely wait to see more economic data before making any big decisions.

This could mean that interest rates will stay low for longer than some investors have expected.