Reuters: Toughest moment for Fed and US economy starts now

Despite 10 interest rate hikes by the US Federal Reserve - or 500 basis points since March 2022 - the economy has yet to feel it to a real extent, writes Reuters.

And the more the Fed approaches the peak rate, politicians, consumers, businesses are more and more in limbo: on the one hand, they should be grateful for the “soft landing” of the economy, which has already begun, but at the same time, they have not yet fully felt everything the impact of the tightening cycle.

In the fight against inflation, Fed officials tried to keep the market from easing financial conditions, but the market itself expected the Fed to quickly begin to cut rates quite sharply to combat the delayed effect of delaying the tightening.

A recent report showed that consumer price inflation in the country has fallen sharply to 3% year on year, which means that the Fed's rate hike campaign is nearing completion.

Historically, it takes 18 to 24 months for changes in monetary policy to show up in the real economy, and a 500 basis point rate hike since March 2022 - or 17 months ago - has still not been recorded.

In fact, this could have a strong impact on employment and a slowdown in GDP growth. One of the Fed's governors, Christopher Waller, warned at the beginning of the year that the measures taken would have an impact in 9-12 months. Meanwhile, the peak deceleration of inflation may occur about a year after the policy tightening, although there is a lot of uncertainty in this matter.

If all the measures taken so far have been essentially restrictive, but not yet fully manifested, while inflation has fallen from 9% to 3%, then there is reason to believe that the work of the Fed has been largely done.

Today, inflation is already close to the target of 2% and is slowing down at the most consistent rate in 100 years, and unemployment is approaching a 50-year low, which is noted by many economists.