Fed to ‘visualize’ expected economic pain – Bloomberg

Federal Reserve Chairman Jerome Powell has warned in recent weeks that raising interest rates to fight inflation would be “painful”. We believe that the latest quarterly economic forecasts to be released after the Federal Open Market Committee (FOMC) meetings on the 20th and 21st will show that there is pain with concrete numbers, such as a significant upward revision to the unemployment rate forecast in the future is done.

The Fed is expected to raise interest rates by 0.75 points for the third straight meeting this time. That would raise the federal funds rate target to levels not seen since before the financial crisis of 2008. The next phase of tightening is even more dangerous and will likely be reflected in the latest economic forecasts.

Fed Projections for Unemployment Rate Set to Rise Again

Officials see higher unemployment as a necessary cost of fighting inflation

Sources: Board of Governors of the Federal Reserve, Bloomberg.

Inflation has barely slowed since the last forecast in June, and officials are more willing to tighten. They have also become more skeptical of past estimates of the relationship between unemployment and inflation, which is also perhaps why officials are leaning towards a further slowdown in economic activity.

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