Fed’s Pause on Rates Doesn’t Signal the End Game

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As the Federal Reserve gears up for its next policy meeting, officials are signaling a potential pause in their fight against inflation, reflecting a softer labor market and a downtick in prices from pandemic highs. However, the possibility of a pause does not rule out future rate hikes, as Federal Reserve Bank of Dallas President Lorie Logan emphasized in a recent speech, stating that while a gradual approach is necessary at this stage, further action may yet be needed to quell inflation.

These sentiments have been echoed by other Fed officials, including Boston Federal Reserve President Susan Collins and San Francisco Federal Reserve Bank President Mary Daly, both emphasizing the need for patience and a holistic data assessment. Despite a drop in inflation from over 9% to closer to 3%, core inflation, which strips out volatile food and energy prices, still hovers around 4%—double the Fed’s inflation target. This suggests that the central bank’s work is far from over, leaving the door open to a variety of policy options.

Federal Reserve Officials Signal Possible Pause in Rate Hike

Federal Reserve officials have indicated that the central bank’s fight against inflation could slow down in the wake of a softening labor market and a slight decrease in prices from pandemic highs. The indication suggests a potential pause in the rate hike this month.

A Gradual Approach to Inflation

In a recent statement, Federal Reserve Bank of Dallas president Lorie Logan indicated the need for a gradual approach in dealing with inflation. Speaking before the Dallas Business Club, Logan stated, "At this stage, I believe we must proceed gradually, weighing the risk that inflation will be too high against the risk of dampening the economy too much." She further added that further evaluation and data could necessitate more actions to counter inflation.

This sentiment was echoed by other Fed officials such as Boston Federal Reserve President Susan Collins and San Francisco Federal Reserve Bank President Mary Daly. While they acknowledged the possibility of further rate hikes, they emphasized the need for a patient, measured approach.

Anticipated Outcomes for September Meeting

The Fed’s next policy meeting slated for September 19-20 is expected to see rates held steady within the 5.25%-5.5% range as the inflation data continues to show signs of cooling. In July, the Fed raised interest rates for the 11th time since March 2022, indicating the possibility of one more hike based on previous projections.

Weighing Inflation Against Economic Strength

Despite a decrease in inflation from just over 9% to around 3%, the core inflation rate, which excludes volatile food and energy prices, is still at 4% – double the Fed’s target. The job market has also seen a slowdown with the US economy adding 187,000 jobs in August, down from 105,000 in July and 157,000 in June. However, the US economy has remained stronger than expected, making it too early to determine if inflation is on a sustained path back to 2%.

Fed’s Stance on Future Actions

While the Fed maintains its stance to raise rates further if necessary, there is room to continue monitoring the impacts of its actions over the past year before further raising rates. Fed Chair Jerome Powell stated that they are prepared to hold policy at a restrictive level until they are confident that inflation is sustainably decreasing towards their objective.

There are divisions within the Fed on how to achieve the 2% target inflation rate, with some members advocating for maintaining the current rates, believing that the full effects of the Fed’s rate hikes have yet to be felt. Among them are Atlanta Fed president Raphael Bostic and Philadelphia Federal Reserve Bank President Patrick Harker who suggest a cautious and patient approach.


The next Federal Reserve policy meeting will provide more clarity on the direction of the economy and the future of interest rates. In the face of a cooling labor market and lower inflation, the Fed’s approach will be critical in maintaining economic stability. While the possibility of further rate hikes isn’t off the table, the consensus is leaning towards a gradual, cautious approach to managing inflation.

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