Federal Reserve Chair Jerome Powell is testifying before the US Senate on Tuesday, and market participants are listening for signals about the future of interest rate policy.
Jefferies senior US economist Thomas Simons joins Catalysts to analyze the monetary policy outlook.
Simons emphasizes that while the central bank aims to bring inflation closer to 2%, there needs to be a shift in perspective. “They really need to get away from this concept that there’s an individual neutral Fed funds rate and that the gap is really particularly meaningful,” he says.
“There definitely is a game going on right now where it’s all about managing expectations rather than needing to adjust rates one direction or the other,” he explains, adding that “it’s a difficult path to go down.” However, Simons notes that in the current economic environment, “the risk of being wrong with policy is actually somewhat lessened.”
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