Fed Expected to Respond Strongly to Inflation, Job Market Conditions, Research Shows
The U.S. central bank is expected to respond "strongly and systematically" to changes in inflation and the labor market, according to research published on Monday by the San Francisco Fed. This response has been driven by the sensitivity of financial markets to U.S. economic data, with the Fed's actions closely tied to inflation and labor market trends. The Fed's target policy rate is currently in the 4.25%-4.50% range.
- The robustness of this relationship highlights the critical role that market expectations play in shaping monetary policy decisions, underscoring the need for clear communication from central banks about their intentions.
- What implications might a more rapid tapering of quantitative easing have on global financial markets and economic growth, particularly if inflation concerns remain at bay?