Fannie Mae Sees Fed Pursuing “Higher for Longer” Interest Rate Policy
The recent “blowout” labor report and unexpected robustness in retail sales and manufacturing output don’t mean a reduced likelihood of recession, the Fannie Mae Economic and Strategic Research Group said Tuesday. The group continues to expect the economy to fall into a modest recession and now believes the likely start date will be in the second quarter of 2023.
Far from encouraging the Federal Reserve to ease up on its tight monetary policy, recent data releases raise the possibility of the Fed both pushing its federal funds rate target higher than currently expected and keeping it there for longer to meaningfully slow economic momentum and inflation, posing larger and longer-term risks to the economy and financial stability.
“Recent data have been stronger than expected in ways that we believe are likely to lead to tighter monetary policy with attendant increases in interest rates,” said Doug Duncan, Fannie Mae’s chief economist.