Fed officials will give specific numerical references this week to the "pain" they have been warning of recently. They are about to release the latest forecasts for the US economy, which may showThey expect interest rates and unemployment to rise sharply in the future, which is the expected cost of reducing inflation, what Powell previously described as "pain".

After a two-day policy meeting in Washington, the Fed will release its latest forecasts on Wednesday (early Thursday, Beijing time), and most analysts now expect officials to raise benchmark interest rates by 75 basis points for the third time in a row. the move will raise interest rates to their highest level since before the 2008 financial crisis.

The FedWatch tool of Zhi Merchants Institute showsThe market now expects the probability of the Fed to raise interest rates by 75 basis points in September as high as 82 per cent (previously as high as 90 per cent), a probability that the market had not included the rate hike in the pricing range before the release of the 18%--CPI data.The risks in the next phase of the austerity cycle are likely to be greater, which may be reflected in their revised forecasts.

The Federal Reserve is about to reveal the "pain" it may face in the next phase of the inflation struggle.

The APP of Zhitong Finance noted that US inflation had barely slowed since the Fed released its last round of economic forecasts in June, prompting Fed officials to take a more aggressive policy stance. They are also increasingly sceptical about past forecasts of the relationship between unemployment and inflation, which may be part of the reason why they now tend to target a larger slowdown in economic activity.

"higher interest rates will certainly have a greater impact on unemployment.In the Fed's latest forecast, we expect the unemployment rate to be close to 4.5%Brett Ryan, senior US economist at Deutsche Bank in New York. They will still promote the idea of a 'soft landing', but that will mean a higher risk of a recession in this case. "

In June, policymakers' median forecast for unemployment showed that the unemployment rate would rise by 0.5 percentage point to 4.1 per cent by the end of 2024. Since then, however, non-farm data have remained strong, and monthly consumer price data have been disappointing: the latest report released by the labour department on September 13th shows that inflation is as high as 8.3% compared with last year.

At the same time, Federal Reserve Chairman Powell and other officials stepped up public warnings about rising interest rates. Powell stressed in an important speech at the annual meeting of the central bank in Jackson Hole on August 26th: "these measures will bring some 'pain' to households and businesses, but they represent the unfortunate cost of reducing inflation. Failure to restore price stability will mean more pain. "

Final interest rates and unemployment forecasts are top priorities!

The theme of these economic forecasts will be to prepare for higher unemployment because more interest rate hikes and longer restrictive interest rates will be needed before inflation is brought under control.The current market price of the terminal interest rate for federal funds is about 4.4%, which policy makers may think is a reasonable price.Bloomberg economists Anna Wong, Andrew Husby and Eliza Winger said in a report.

"I am optimistic that we will be able to make it through this stage," said Charles Evans, the 2023 FOMC vote committee and chairman of the Chicago Fed, who is usually seen as one of the Fed's more dovish policy makers during his 15-year term.And keep the unemployment rate at around 4.5% at the end of the cycle.It added that the situation would still be a pretty good result, although it would be costly for some residents.

But lingering inflation is not the only data point leading to the Fed's increasingly pessimistic outlook for the future, and record job openings have also played an important role. Moreover, the public debate over these policies has become increasingly heated since June, which may herald higher forecasts for unemployment. Fed officials generally believe that unemployment will be consistent with low and stable inflation in the long run.

Their median forecast for the unemployment rate has been stable at around 4 per cent since before the new crown outbreak, so if it is raised, it would mark a major shift in the collective attitudes of policy makers, FOMC members. Powell hinted at this possibility at a news conference on July 27th, citing a decline in the filling rate of vacant jobs.

Some analysts believe that their idea will be that in the case of one unemployed person for every two vacant jobs (the proportion was about 1.2 a few years before the COVID-19 epidemic), the unemployment rate must now be higher than the previous level. in order to bring the supply of labor more in line with labor demand and reduce the pressure on wage increases.

According to the data, the unemployment rate in the United States was 3.7% in August, and about 6 million Americans are actively looking for work. If the unemployment rate rises to 4.5 per cent (assuming the size of the labour force remains the same), the number of unemployed will reach about 1.3 million.

But Michelle Holder, an economics professor at John Jay School of Criminal Justice, believes that the pain will not be evenly distributed.

Holder points out that during economic downturns, unemployment among blacks and Spanish-speaking Americans tends to rise faster than whites. As a result of unemployment, the risk of homelessness and hunger among low-income families will also increase, as will the long-term impact of unemployment on income and employability. "what I think the Fed ignores is that this pain is not a moderate pain for everyone," Holder said. "