Interest Message From FED Official: What Will Be The Results From Bitcoin’s Eagerly Awaited December Meeting?

In an interview, the FED official said that due to the over-inflated labor market, inflation risks becoming entrenched in the economy, which will make it increasingly difficult for the FED to reduce inflation without a recession.

“I Don’t Know How We Can Bring Inflation Level Down Without Economic Slowdown”

Esther George, President of the Kansas City Fed, who will retire in January, said:

“I’m looking at a labor market that’s so tight that I don’t know how you can get that level of inflation down without a real economic slowdown, and maybe we can even contract the economy to get there.”

Some of George’s colleagues recently said they still see a way for the Fed to curb inflation without a serious downturn, but George was more cautious in an interview Tuesday:

“In my 40 years at the Fed, I have never seen a time when this kind of tightening has not had painful consequences.”

Officials are raising interest rates at the most aggressive rate since the early 1980s to combat inflation, which has reached a 40-year high in the US. On November 2, the FED approved the fourth consecutive rate hike of 0.75 percentage points, raising the benchmark federal funds rate to the range of 3.75% to 4%.

George said the pandemic and disrupted supply chains were a major contributor to the initial spike in price pressures last year.

But he noted that the recovery of the economy’s so-called supply side capacity to supply workers and produce goods and services has been slower, keeping inflation high for longer than many politicians had anticipated.

Increase in interest rates in the USA bitcoin has a bad effect on it.

FED Official George Expressed His Opinion for the December 13-14 Meeting

As many officials, including George, support, the Fed may need to keep raising interest rates even if it slows its rate of increase at its December 13-14 meeting.

George continued his speech:

“Since we can’t get help on the supply side, we still have a lot of work to do. When I think of inflation today, we’ve shifted the direction of the supply chain and production side woes. Now, we’re really looking at the workforce as the driving force here.”

George hailed the latest news of slowing inflation as a good start, as the news revealed that prices for goods and services fell in interest rate-sensitive sectors of the economy, such as housing.

But George said it’s too early to predict when the Fed will stop raising interest rates because he is uncomfortable with strong price pressures in labor-intensive services sectors. These prices tend to be more persistent, meaning they tend to slow very little or not at all, except in a recession.

At the same time, George suggested that interest rates may need to rise higher to slow the economy because households are in a better financial position from the pandemic period thanks to government relief funds and deferred spending.

George said it would make sense for the Fed to slow the rate of rate hikes into a more traditional quarter-point increase next year. But he said the “main challenge” for politicians is centered on the dangers of ending interest rates prematurely:

“For me, the most important question for this committee as we look to the next year is to be careful not to stop too soon. That was the lesson learned from the 1970s and ’80s: When you were thinking, ‘Oh, now we’re done, we can stop,’ you see inflation reappearing somehow.”

*Not investment advice.