Federal Reserve policymakers say new inflation data due later this week will help them decide whether to slow rate hikes at their next meeting by just a quarter of a unit instead of 2022’s higher rates.

So if this US consumer price data confirms the economic cooling seen in the latest labor market data, then officials like Atlanta Fed President Rafael Bostic should think more seriously about the percentage unit of a quarter-cent increase and move in that direction. . Speaking on Monday, Bostic himself told reporters about this. “Ultimately, I want us to achieve a rate increase of 25 basis points,” he said. “The specific time will depend on the incoming data.” When asked in an interview with the Wall Street Journal about the preferred size of the interest rate hike at the January 31-February 1 meeting, San Francisco Fed President Mary Daly said that, in her opinion, the interest rate hike could be either 25 or 50 basis points. . are on the table.

Both Delhi and Bostick expect the Bank’s key rate, currently in the range of 4.25% to 4.5%, will need to rise to the range of 5% to 5.25% to affect inflation. According to Mary Daly, achieving this “in incremental steps allows it to be responsive to incoming information” and account for the delayed impact of higher borrowing costs on the economy as a whole. After nearly a year of aggressive rate hikes aimed at slowing the economy and curbing inflation, Fed officials say they are supported by data on the recent slowdown in job creation and wage growth. This may signal an index rollback.

However, they are wary of stopping rate hikes, or even moving to smaller rate hikes too early, for fear of perpetuating high inflation and eventually forcing the Fed to raise rates further. As Bank officials consider the size of the rate hike ahead of their next meeting, they also continue to discuss how long they need to stay high to bring inflation closer to the 2% target.

The latest minutes of the meeting in December 2022 showed that politicians do not expect a rate cut this year. This is contrary to market expectations that the Fed will begin to wind down its policy in the second half of the year, possibly in response to a slowdown in the economy. On Monday, Rafael Bostic stressed that he takes as a basic assumption that there will be no cuts in 2024, although there are doubts about this.

After all, that would make him one of the most hawkish of the 19 Fed officials and politicians, most of whom expect a key rate cut below 4.5% next year.