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Federal Reserve Bank of Chicago President Austan Goolsbee said on Sunday that central bank officials should be wary of keeping the restrictive policy in place longer than necessary.  Key quotes Credit conditions seem tight and are getting tighter.  Unemployment is up, and that’s a caution sign. No certainty the Fed will cut interest rates next month, but not doing so could damage the labour market When you set a rate high like we have and hold it there while inflation falls, you’re actually tightening.  The economic data is a mix of positive indicators and some that are more concerning.  If you keep too tight for too long, you will have a problem on the employment side of the Fed’s mandate. The impact of past hikes may not be fully realized.  Market reaction  The US Dollar Index (DXY) is trading 0.01% higher on the day at 102.60, as of writing. Fed FAQs Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback. The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board…

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Filed under: News - @ August 19, 2024 12:35 am