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WASHINGTON, Oct 16 - Federal Reserve officials may not raise interest rates when they meet in two weeks but neither will they say their 19-month drive to hike borrowing costs is over, a difficult messaging challenge U.S. central bank chief Jerome Powell will take on this week.* Reports have shown the economy still growing too fast to cool inflation fully, while rocketing bond yields could push that activity to a hard stop;* Half of the U.S.
The Fed"has pivoted rather quickly from a singular inflation focus to weighing recession avoidance," analysts at Monetary Policy Analytics, led by former Fed Governor Larry Meyer, wrote last week. The next meeting may well open a new chapter in the policy discussion, with Powell's remarks on Thursday possibly laying the groundwork.
While that might help slow inflation, it can also go too far. The yield on the 10-year Treasury note is just about six-tenths of a percentage point below the Fed's policy rate; when the gap between the two shifts from negative to positive is when monetary policy gets perhaps its truest test. Those moments tend to be followed by recession. When they aren't, it can signal the"soft landing" the Fed seeks.
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