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Does 'sticky inflation' always mean a rate hike, or can it just be a longer pause?
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?
2 comments · 3 points
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.