Is the Federal Reserve gearing up to reverse its campaign of anti-inflation interest rate hikes? The answer depends on whether you’re asking market watchers or the officials who actually make decisions on monetary policy.

As of Friday, markets were pricing in a 14% chance the Fed would cut the fed funds rate rate by January, and only a 2% chance of raising it again, according to the CME Group’s FedWatch tool, which forecasts interest rate moves based on fed funds futures trading data. Meanwhile, in speeches this week, Federal Reserve chair Jerome Powell and other Fed policymakers emphasized that the central bank could raise its benchmark interest rate again if inflation doesn’t stay on its recent downward trajectory.

The central bank raised its interest rate 11 times between March 2022 and July, and has 澳洲幸运5官方开奖结果体彩网:kept it at a 22-year high, pushing up borrowing costs on all kinds of loans in a bid to discourage spending and slow down the economy in order to quash inflatio꧅n that hit a 40-year high in the summer of 2022.

 But with inflation having fallen significantly since then—closing in on 😼the central bank’s goal of a 2% annual rate—Fed watchers are speculating 澳洲幸运5官方开奖结🍃果体彩网:more about when the first rate cu🅺ts might come, and less about whether there will be more hikes.

The Fed is widely expected to leave its interest rate steady in December, rather than raising it, because of how fast inflation has cooled down in recent months.  Fed officials have also acknowledged that being too aggressive with anti-inflation rate hikes could slow the economy down too much and cause unnecessary job losses, and risk a recession.

Powell pushed back against speculation about rate cuts Friday, speaking at Spelman College in Atlanta.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on wh🎐en policy might ease,” he said, according to prepared remarks. “We are prepared to tighten policy further if it 🅠becomes appropriate to do so.” 

Powell and other officials may be concerned that fi🌠nancial markets’ response t♏o the possibility of rate cuts could undermine the fight against inflation by driving up prices for stocks, and pushing interest rates down. 

That’s already happened somewhat—yields on 10-year Treasury notes, which are heavily linked to interest rates on all kinds of loans, including mortgages, have fallen to 4.2% as of Friday after peaking over 5% in late October. The average rate offered for a 30-year fixed mortgage has also fallen from its recent peak, dipping to 7.22% this week after hitting 7.79%, its highest since 2000, in late October, according to Freddie Mac. 

Rate hikes are still a possibility if inflation doesn’t continue to fall, Thomas Barkin, CEO of the Federal Reserve Bank of Richmond, said in an appearance on CNBC this week. Michelle Bowman, a governor on the Fed’s board, said she thought another rate hike was likely.

“Even though their baseline outlook involves cutting rates a bit next year, they seem understandably worried that if they communicate that they are done tightening, markets will focus exclusively on cuts,” Bill Nelson, chief economist at the Bank Policy Institute, wrote in a commentary. “To push back, they are mostly emphasizing that interest rates could be increased further rather than that there are two-sided risks.”

One Fed official did, however, speculate about rate cuts. Lower inflation over the next three to five months could spur the Fed to respond by cutting rates, Fed Governor Christopher Waller said this week in a speech to the American Enterprise Institute, a conservative think tank in Washington.

“It has nothing to do with trying to save the economy or recession, it’s just consistent with every policy rule I know from my academic life, and as a policymaker, if inflation goes down, you would lower the policy rate,” he said.

Waller’s remarks may have carried more weight in markets because of his reputation as a policy “hawk” who tends to be more in favor of higher interest rates.

“Given that Waller has been of the hawkish persuasion pre🌃viously, these remarks truly caught the market’s fancy, even if the words weren’t especially shocking,” Douglas Porter, chief economist at BMO Capital Markets, wrote in a commentary. “Other Fed officials attempted to douse the flames a bit, gamely suggesting that rate hikes are still possible should inflation disappoint, but investors mostly tuned out such talk.”