In the second half of the year, the Fed's macroeconomic policy can basically be summarized as "wait and see", but this is actually a well-thought-out strategy.
According to Nick Timiraos' analysis, the Fed's current attitude is "we are not in a hurry." In the past few months, the Fed has been evaluating economic data to see if it needs to continue raising interest rates (Fox Business) (Fox Business). Although their previous interest rate hikes did help to suppress inflation, they also brought some side effects, such as market instability and rising borrowing costs.
Timiraos pointed out that the Fed is now basically unanimous in its strategy of "watch first and then act." This "wait-and-see" strategy is not because they are lazy, but because they think the most important thing now is to stabilize the economy and prevent it from experiencing big ups and downs (Fox Business). After all, overly aggressive interest rate hikes may suppress economic growth, while not raising interest rates may cause inflation to return.
Judging from the data, the US economic performance is somewhat mixed. On the one hand, the unemployment rate remains at a low level and economic activity is slowly picking up; on the other hand, although inflation has eased, it has not yet fully reached the target level. At the same time, global economic uncertainty and geopolitical risks have also made the Fed more cautious (Fox Business).
So, on the whole, the Fed may continue to maintain the current interest rate level in the second half of the year and wait for more data to make further decisions. For investors and the market, this means that the Fed will not suddenly take extreme measures, and the market will have a relatively stable expectation environment. Although this strategy sounds conservative, in the current complex economic environment, stability may be the wisest choice.
In general, the Fed is now playing a game of "don't make mistakes". They hope to give the market and the economy more time and space through prudent policies to see what will happen next. This wait-and-see and cautious attitude may be what is most needed in the current economic environment.
