Nick Timiraos: Fed worries real interest rates are too high and will abandon tightening bias this week
"Fed Whisperer" Nick Timiraos wrote that the Fed will not cut interest rates at this week's meeting because the economy has been steadily growing. Although the monthly inflation rate, excluding food and energy, has been at or below 2% for six of the past seven months, the Fed wants to ensure that this situation can continue before cutting interest rates. This week, Fed officials may take a symbolic and important step by no longer stating in their policy statement that the possibility of a rate hike is greater than a rate cut. Typically, the Fed cuts interest rates when economic activity sharply slows down, but until the end of last year, economic growth remained unexpectedly strong. Instead, they are considering whether softening inflation means that if no action is taken, real interest rates may overly restrict economic activity.
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