Explainer-Charting the Fed's policy path
(Reuters) — Investors are increasingly of a mind that the U.S. Federal Reserve has delivered the final installment of what has been most aggressive policy-tightening cycle in four decades, but central bank officials caution it is still too soon to make that call.
Last week's quarter-point interest-rate hike brought the Fed's policy rate to a range of 5.25% to 5.50% from near zero 16 months ago. The rate hikes are aimed at bringing what had been the highest inflation since the 1980s back down to their target of 2%.
They have made notable progress, with the Fed's preferred inflation gauge — the Personal Consumption Expenditures price index (PCE) — decelerating in June to 3% from its peak rate of 7% last summer.
Fed officials are not ready to declare victory, though. Central bank Chair Jerome Powell said last week the pieces of the low inflation «puzzle» may be aligning, but he doesn't trust it yet.
An eight-week gap until the next meeting on Sept. 19-20 will feature two months worth of several critical pieces of data on employment, growth and inflation, the «totality» of which he said will guide the decision to stand pat here or push rates higher still.
Here is a guide to some of the numbers shaping the policy debate:
EMPLOYMENT (Released on Aug. 4, next release on Sept. 1):
The U.S. economy in July added 187,000 jobs, fewer than economists expected and fresh evidence of more of the kind of labor market cooling that Fed officials say is needed to ease inflation pressures.
Hourly wage gains, however, remained strong, holding at 4.4% for a fourth straight month, and the unemployment rate ticked down to 3.5%. Both are signs of labor market tightness that may cast doubt on whether the Fed really has done enough.
The mixed
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