Den høje inflation i USA bliver mere langvarig end ventet, og det bringer centralbanken i en vanskelig position, vurderer Pimco. De næste måneder bliver en udfordring, for der kan blive forventninger på markedet om en vedvarende højere inflation. Pimco tror, at Jerome Powell vil blive genudnævnt som centralbankchef, men Pimco hæfter sig også ved, at der er en fløj hos Demokraterne, der vil have en meget mere due-agtig pengepolitik – og spænde ben for rentestigninger.
Inflation Risks Put the Fed in an Uncomfortable Place
As expected, the U.S. Federal Reserve announced the first reduction in its monthly pace of bond purchases at the November FOMC (Federal Open Market Committee) meeting, while also admitting that the outlook for inflation is more uncertain. Markets responded calmly to the news but looking ahead, Fed policymakers have the tougher task of managing markets’ rate expectations in the face of elevated inflation risks.
While we agree with the Fed that the currently high inflation is likely to dissipate, it now appears that it will take longer to dissipate than initially thought. Inflation that remains elevated for longer, even if it’s attributed to temporary factors, increases the risk that longer-term inflation expectations also adjust higher – something the Fed wants to avoid. Indeed, the next few months are likely to test policymakers’ patience, and we see meaningful risk of Fed officials’ expectations for rate hikes being pulled further forward when the Fed’s next economic projections are released in December.
Next several months will be challenging for the Fed
While we still expect U.S. inflation to return to the Fed’s target by the end of 2022, additional months of above-target inflation raise the risk that inflation expectations accelerate beyond levels consistent with the 2% target – something the Fed will want to avoid. As a result, effectively communicating the outlook for monetary policy over the next few quarters is likely to be challenging for the Fed for this and several other reasons.
First, while Fed officials likely want to manage the risk of an unwanted “jump” to higher inflation expectations, they will have to weigh this risk against the most likely outcome that inflation dissipates by itself. Since monetary policy works through long and variable lags, it’s possible that inflation could have already dissipated by the time the economy starts to adjust to early rate hikes.
Second, several pending leadership transitions raise the prospect of shifting policy views of the FOMC’s leadership, which may contribute to greater uncertainty and market volatility. And while we expect Chair Powell to be renominated, concerns raised by progressive Democrats make that outcome more uncertain.
Lastly, the Bank of Canada and the Bank of England are communicating their plans to raise rates ahead of the Fed. While earlier liftoff from other smaller developed market central banks should not directly influence Fed policy, officials will monitor the impact of policy adjustments abroad on U.S. rates and the dollar in the context of broader financial conditions, which do affect the U.S. economy.
