Fed's inflation strategy key to US economic outlook: NRF

The Fed's preferred inflation gauge, the Personal Consumption Expenditures Price Index, indicated a slight decrease to 2.4 per cent in January from 2.6 per cent in December, reflecting ongoing price pressure challenges.

“With the US economy’s strength resting heavily on household spending, all eyes are on the consumer—and how consumers will respond the next few months to the Federal Reserve’s ongoing efforts to tame inflation,” Kleinhenz said. “While inflation is down from its peak, it has slowed less than expected and is still an important problem that remains to be solved.”

The report also highlighted a dip in overall consumer spending in January, attributed to a reduction in goods spending and falling goods prices. Despite these challenges, the Fed has maintained interest rates, opting for a cautious approach towards adjusting monetary policy. The Federal Open Markets Committee recently emphasised the need for greater assurance that inflation is consistently moving towards its 2 per cent goal before considering rate reductions.

Kleinhenz anticipates the Fed will maintain steady rates in March, with potential for a quarter percentage point cut later in the year, possibly in April or June, depending on inflation trends. He suggests that further cuts could occur in September and December, potentially lowering rates by up to a full percentage point in total to combat persistent inflation and support economic stability.

Fibre2Fashion News Desk (DP)