Adam Posen on inflation risks and need for Fed hike (with speaker1)

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Peterson Institute for International Economics 7.0
Policy Institute
Adam Posen 8.0

Adam Posen on inflation risks and need for Fed hike (with speaker1)

yields

there should be a hike in the last meeting... they're going to be hiking at the December and January meetings Argues the Fed should be tightening policy due to resilient economy and incoming inflation, which would put upward pressure on short-term rates and likely the yield curve.

3 calls

-3

no reliable edge (random outcomes)

10/11/2025 2:56:32 AM	short term sharp down	5 days later	-1.09%	+1.63%
8/22/2025 9:51:01 PM	medium term cautious up	21 days later	-5.64%	-2.82%

Adam, do you have any issue with that [Barry's view] or would you say that's okay?

speaker1
Adam Posen

I have several issues. Monetary policy shouldn't be used to bail out particular sectors like small banks or small business.

Part of what Secretary [Yellen?] and Chair nominee [Powell?] complained about was using monetary policy for distributive purposes.
Adam Posen

Steepening the yield curve might improve bank profitability but makes credit conditions harder for everybody else.

If he says on balance monetary conditions are about right, I don't think they are... you certainly don't want to tighten.
Adam Posen

The reason small business lending is bad is Trump administration uncertainty from trade, war, investment, regulatory, and anti-immigration policies.

Lowest employment growth in areas reliant on migrant workers. No investment outside of AI due to a pall of uncertainty.
Adam Posen

The labor market shows the economy is still much more resilient. We're going to have inflation from all of this, and it will get worse if the Fed continues to loosen.
So you think we're going to get inflation. If you were Fed chair for the rest of the year, what would your policy response look like?

speaker1
Adam Posen

Realistically you cannot raise rates close to the election, but there should be a hike in the last meeting before the new chair takes over.

At a minimum, you should get a clear lean in statements for a tightening direction.
Adam Posen

Realistically in terms of forecasts, they're going to be hiking at the December and January meetings.

Because they're going to do nothing between now [and then].

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