Bloomberg Surveillance · Wednesday, September 30, 2026
The Federal Reserve is pursuing a gradual interest rate hike cycle not to slow the economy, but to accelerate the reduction of inflation, which is currently not accelerating but remains above target. This approach is enabled by a solid economy and labor market. The Fed's commitment to its 2% inflation target, even if the actual acceptable range is slightly higher, is seen as crucial for maintaining credibility.
“When the Fed embarks on a tightening cycle, typically it's because inflation is going up. That's not really what we're seeing here. We're just seeing it not come down. And if you look at today's data, there's more of that in there, right? The PCE index, the core PCE index are running above the Fed's target, but they're gradually moving in the right direction. And so that's a different type of tightening cycle than many people are used to.”
“They're not trying to slow the economy. They're not trying to crimp things down here. They're just trying to accelerate this process.”
“To me, that's a recipe for a constrained, gradual cycle rather than a rapid, aggressive one.”