‘US Fed on track to avoid recession’ 

WASHINGTON – The Federal Reserve is on track to tackle US inflation without pushing the country into a damaging recession, a senior official on the bank’s rate-setting committee said Tuesday.

After pushing its key lending rate to a 22-year high to tackle stubborn inflation, the Fed recently slowed down the pace of its hikes, citing a need to be data-dependent.

Consumer inflation has fallen sharply since the campaign began in March 2022, but remains stuck above the Fed’s long-term target of two percent, maintaining the pressure on policymakers.

“We feel like we’re on track for a soft landing,” Minneapolis Fed president Neel Kashkari told a conference in North Dakota, using a popular term to describe tackling inflation while avoiding a recession.

“Inflation has come down quite a bit, the labor market has remained strong, maybe we can get inflation all the way back down and avoiding (sic) a deep recession,” he said.

Kashkari also engaged with recent comments from Dallas Fed president Lorie Logan, who said elevated long-term interest rates could mean there is “less need” for another rate hike.

Yields on the 10-year US Treasury recently rose to a 16-year high as traders raised their expectations that interest rates will have to remain higher for longer to bring inflation down.

Higher yields on longer-term notes feed into increased consumer borrowing costs, which can act to constrain economic activity and reduce the rate at which prices increase.

“It’s certainly possible that higher long term yields may do some of the work for us in terms of bringing inflation back down,” Kashkari said Tuesday.

But he warned that if yields rose due to a change in expectations about Fed policy, the US central bank “might actually have to follow through on their expectations in order to maintain those yields.”

“So it’s a little bit circuitous, and it’s hard for me to say definitively, ‘hey, because they’ve moved therefore we don’t have to move,’”  he added.

Meanwhile, Wall Street stocks notched a third straight day of gains on Tuesday as bond yields eased from recent highs, while markets monitored risks from the Israel-Hamas war.

The closely watched 10-year US Treasury note yield, which is used to price loans and mortgages, fell further on hints from Federal Reserve officials that they may be done hiking interest rates.

Elevated long-term interest rates could mean there is “less need” for another rate hike, Dallas Fed president Lorie Logan said Monday.

Her comments, and those of another Fed official, are a recognition “that financial conditions have tightened because of the bonds sell off, and that’s going to slow the economy and slow inflation,” Karl Haeling of LBBW told AFP.

The Dow Jones Industrial Average finished the day up 0.4 percent at 33,739.30.

The broad-based S&P 500 added 0.5 percent to close at 4,358.24, while the tech-rich Nasdaq Composite Index advanced 0.6 percent to 13,562.84.

Oil prices eased slightly, a day after they surged on fears that war between Israel and Hamas militants in Gaza could spread to other countries in the oil-rich region.

Among individual stocks, shares in the beverage company PepsiCo rose 1.9 percent after it reported better-than-expected third quarter results.

Enphase Energy saw its shares rise 5.0 percent as investors flocked to energy firms, which stand to benefit from higher oil prices.