The Fed Should Continue Hiking Past 6%
Chip Somodevilla The target is 2% inflation over time Here is the key sentence from the June FOMC meeting statement: In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. But what is the most important part in this statement that gives the clue about future monetary policy?It's bolded - it's "over-time". The Fed aims to return inflation to 2% over time. What does it mean?It means that the Fed could decide to pause the interest rate hiking cycle with core CPI inflation still elevated at 4.8%, if the conditions are set for inflation to fall to 2% over time. This is essentially what the soft-landing crowd is expecting - the Fed will pause after the July hike to 5.35%, despite the fact that core inflation remains elevated at