There’s actually a fair amount of money being bet in markets that the Fed will be even more aggressive and cut interest rates half-a-percentage point. I do expect the Fed to cut interest rates by a quarter percentage point, not any more than that. What action do you expect the Fed to take at next week’s meeting? Also, if the economy is stimulated, that should help the global economic picture. That means increasing demand for goods and services, which will lead to more price pressures for firms. In order to generate more inflation, the Fed will try to stimulate the economy. So both of those factors will push in the same direction. The other concern is how risks to the global economy can affect the United States and its economic picture. Nearly eight years ago, they adopted an inflation target of 2 percent, which has largely remained out of reach. That hasn’t happened this time, and the Fed is concerned. Economists usually expect that low unemployment will give rise to wage competition, which will drive up wages that feed into cost pressures for firms and contribute to higher inflation. One is that inflation continues to be low, despite the fact that unemployment is also low by historical standards. The committee will be thinking about two main factors. Adam Fenster) What factors will the members of the FOMC consider when they meet next week? But more significantly, he believes it will be three years or longer before the Fed even considers a rate increase. Kocherlakota says there may be an additional rate cut in the fall. The committee sets monetary policy for the Federal Reserve System, largely by adjusting the federal funds rate, which is the interest rate commercial banks charge each other for loans made overnight. Kocherlakota, a former president of the Federal Reserve Bank of Minneapolis, says there are signs that the Fed will cut rates the only question is by how much.Īt the July 30 and 31 meeting, Kocherlakota expects the 12 members of the Federal Open Market Committee (FOMC) to cut the rate by a quarter percentage point, a move he favors as a way to safeguard against possible risks to the economy. McKenzie Professor of Economics at the University of Rochester. Next week’s meeting of the Federal Reserve will likely mark the beginning of a prolonged period of lower interest rates, says Narayana Kocherlakota, the Lionel W.
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