Former Boston Fed President Suggests Federal Reserve May Pause Interest Rate Hikes

Former Boston Federal Reserve President, Eric Rosengren, has suggested that the Federal Reserve may halt its interest rate hike cycle if the job market and economic growth continue to slow at the current gradual pace. This comes as financial markets have mixed expectations on whether the central bank will pause or hike rates in November. Rosengren stated that as long as inflation remains on track to reach the Fed’s 2% target, there is no need to raise rates further. Recent data indicates that private payroll growth has slowed significantly in August, while the Personal Consumption Expenditure price index excluding food and energy advanced at a lower-than-expected rate. Additionally, the number of people leaving their jobs in July reached lows last seen in early 2021, suggesting that the Fed’s rate hikes are successfully lowering inflation. Rosengren predicts that car prices will fall and banks will continue to slow their lending, dampening economic growth and inflation until the end of the year. However, he believes that interest rate cuts will not occur until the core Consumer Price Index falls closer to 3%. Despite positive economic signs, Rosengren cautioned that it is too early to declare a “soft landing” for the economy, where inflation falls, unemployment remains low, and a recession is avoided. Further observation is needed to confirm this scenario.