The U.S. economy grew strongly in the third quarter, reaching an annual rate of 4.9%, and the Federal Reserve is paying close attention as it considers future policy decisions. Federal Reserve Governor Christopher Waller shared the information at an economic data conference in St. Louis. Tuesday Louis.
Waller highlighted the U.S. economy’s strong performance in the third quarter, noting that all components of U.S. output were growing strongly. This impressive growth is an important factor in the Federal Reserve’s planning of its policy path.
Top Fed officials, including Chairman Jerome Powell, have said economic growth needs to be restrained for some time to curb inflation, which is currently hovering around 3.4% under the Fed’s preferred approach. The goal is to reduce inflation to the central bank’s 2% target.
Many economists and investors are predicting a recession, and most expect the Federal Reserve to keep interest rates on hold at its Dec. 12-13 policy meeting. Waller is known for being a strong supporter of the Fed’s aggressive interest rate hikes to combat high inflation, but he made no policy recommendations in his comments.
However, Waller noted that the labor market is showing signs of cooling after a period of substantial employment growth. He said recent job growth is more in line with pre-pandemic levels, a trend that Fed policymakers view as necessary to achieve their 2% inflation target.
The central bank is currently reviewing various data to decide whether it needs to raise the benchmark overnight rate above the current range of 5.25%-5.50% set in July.
Amid economic growth in recent months, some Fed officials believe rising long-term bond yields suggest credit conditions may tighten enough to eliminate the need for the central bank to raise short-term policy rates.
Chicago Fed President Austen Goolsbee told CNBC on Tuesday that inflation has slowed. Market-based interest rates, if they remain elevated for a sustained period, could signal tightening credit conditions, he said.
Goolsby and Minneapolis Fed President Neel Kashkari said in an interview with Bloomberg Television on Tuesday that they would not rule out the possibility of the Fed continuing to raise interest rates. Acknowledging recent strong activity data, Kashkari said if inflation rises again and the economy continues to perform strongly, it could signal the need for action.
Reuters contributed to this article.
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