Two years ago, in March 2022, the Federal Reserve began raising the interest rate, which currently stands at 5.50%, in an effort to combat high inflation rates.

How have the economic and financial data reacted to this from that time until now?

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Why is the Federal Reserve delaying the start of interest rate cuts

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The inflation rate initially rose to 9% then gradually decreased to 3.2%.
The unemployment rate did not change but remained within the range of 3.4% to 3.9%.
The wage growth rate decreased from 5.6% to 4.1%.
The Reserve’s assets decreased from $9 trillion to $7.4 trillion.
Economic growth increased from 1.8% to 3.1% (on an annual basis).
Residential property prices fluctuated, first rising by 5%, then decreasing by 4.4%, before rising again to 6.8% and remaining at that level.
The yield on 10-year Treasury bonds increased from 1.78% to 4.31%.
Stocks (Dow Jones Index) rose by about 17% and (S&P 500 Index) by about 16%.

Can we say that the Federal Reserve has succeeded in reducing the inflation rate through interest rate hikes and quantitative tightening?

Last week, Federal Reserve member “Austin” stated that inflation is still ravaging the American economy, especially housing inflation.

He also continued that if inflation remains at this level, the Federal Reserve will not lower the interest rate at all this year.

Why is the Federal Reserve delaying the start of interest rate cuts?

Because the interest rate is at its highest level of 5.5% and the markets are anticipating the start of the interest rate cutting process. However, the good economic numbers, such as low unemployment and the availability of 300,000 jobs, add inflationary pressures and make inflation sticky (cohesive). This forces the Federal Reserve to delay the interest rate cutting process or might even raise it again, which is currently the market’s fear. Because when that happens, it could suffocate the economy, leading to rising unemployment and potentially causing a recession.

Yesterday, Neil Kashkari, the president of the Minneapolis Federal Reserve, became the first member of the Federal Open Market Committee (FOMC) to “dare” to indicate that the US central bank, given the strength of the economy and the labor market and the reluctance of inflation to decrease, might not cut the benchmark interest rates in 2024.

The markets are awaiting the inflation figures later this week through the Consumer Price Index.

Has the Federal Reserve succeeded in overcoming inflation?

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