US economists send Fed warning on price increases ahead of anticipated rate decision: ‘Be cautious’

Published On Sep 17, 2024, 7:37 AM

Economists, including former Fed official Thomas Hoenig and MacroMavens economist Stephanie Pomboy, are urging the Federal Reserve to exercise caution regarding interest rate cuts due to higher-than-expected inflation. They argue that the Consumer Price Index (CPI) statistics being used might underestimate current inflation levels and are warning that aggressive cuts could have negative consequences, especially if inflation is not as under control as the Fed believes. Current CPI shows inflation trending down, but these economists believe there is more inflation pressure remaining than acknowledged in the official reports. The Fed is set to announce its decision on interest rates soon, with expectations leaning towards cuts if inflation continues to ease.

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Given the economists' assessment of higher than reported inflation and the potential for the Fed's interest rate decisions to be overly aggressive, certain sectors such as consumer discretionary and technology may face pressure if the Fed acts too quickly to cut rates. If inflation remains a concern, this could negatively affect market confidence and lead to volatility. Additionally, gold's significant price increase could denote rising inflation expectations, influencing investor sentiment across financial markets.

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