Does 'sticky inflation' always mean a rate hike, or can it just be a longer pause?

asked by u/takin25395511 · 5d · 2 answers

Been hearing a lot about 'sticky inflation' and it almost always seems to be paired with predictions of more rate hikes. I get the idea that if it's not coming down, the Fed's hand might be forced. But is there a scenario where inflation stays stubbornly high, say around 3.5-4%, and they just decide to hold rates here for much longer, without necessarily hiking further? Or is 'sticky' implicitly a trigger for more tightening, full stop?

Join the full discussion

Top answers

  • u/jansen_ines· 5 pts· 5d

    The 'longer pause' scenario is plausible, especially if unemployment starts to tick up meaningfully. The Fed has dual mandates, and at a certain point, sustained high rates could tip the economy into a recession they'd want to avoid, even with inflation above target.

  • u/gold_bug_omar· 1 pts· 5d

    That's a great question. I've been wondering the same thing. It feels like the market always jumps to rate hikes, but a prolonged pause makes sense if they're trying to avoid over-tightening.

Related questions