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Investors may be grousing at the highest interest rates<\/a> in over two decades, but one economist says the Fed may not have raised rates enough\u2014and we may be stuck with higher prices as a consequence.<\/p>\n When the central bank stopped raising interest rates in July 2023 it may not have led to sufficient tightening<\/a> in the economy, which is why inflation hasn\u2019t gone down<\/a> to the Fed\u2019s target levels, according to Stifel\u2019s chief economist Lindsey Piegza.\u00a0<\/p>\n \u201cI do think, as we\u2019ve long argued, the Fed with this hyper focus on achieving the soft landing stopped short of where we needed to be to ensure a return to price stability, not just sit on the sidelines and hope for it, but ensure return back to 2%,\u201d Piegza told CNBC<\/em> on Wednesday.\u00a0<\/p>\n The Federal Reserve set out on its dual mandate<\/a> to lower inflation, while maintaining full employment, after the U.S. economy struggled post-pandemic. At its peak in June 2022 inflation was at a 40-year high of 9%, while at the same time the labor market had largely recovered from the mass unemployment of the pandemic. Against that backdrop the Fed became laser focused on the so-called soft landing\u2014lowering inflation without the customary spike in the unemployment rate. That focus led to a cycle of rate hikes that still haven\u2019t done enough to sufficiently lower inflation, according to Piegza. In fact, she argues that the soft landing can\u2019t happen until prices come down even more.\u00a0<\/p>\n \u201cWe\u2019re not there yet, because remember, part of the soft landing is that eventual return to price stability,\u201d Piegza said. \u201cWe\u2019re still well above the 2% target with really no confidence yet that we will return to that disinflationary trend.\u201d\u00a0<\/p>\n The lingering inflation has been a persistent problem for the Fed since the start of the year. Stifel\u2019s position has been that the economy is still too strong and consumers are still willing to spend too much in order for inflation to come down significantly. As far back as January, Stifel\u2019s CEO Ron Kruszewski was skeptical that inflation had come down enough for the Fed to start cutting rates, as many investors expected at the time.\u00a0<\/p>\n \u201cI\u2019m not so sure inflation is completely tamed,\u201d Kruszewski told<\/a> Yahoo<\/a> News<\/em> while attending the World Economic Forum in Davos, Switzerland.\u00a0<\/p>\n As the last mile of inflation remains stubbornly hard to cross, some Fed officials have started floating the idea that the central bank may actually have to further raise rates instead of lowering them. That would mark a major reversal of the markets\u2019 expectations, which started the year predicting as many as six rate cuts<\/a>. Piegza, though, doesn\u2019t think the Fed should raise rates.\u00a0<\/p>\n \u201cThe Fed should not move the goalpost at this point but do the work required to reinstate price stability to the 2% level previously indicated,\u201d Piegza told Fortune<\/em> in an email.\u00a0<\/p>\n Possible rate hikes would require a drastic shift in the current trajectory of inflation, which according to the Fed\u2019s preferred metric has hovered around 2.6% since the start of the year. For Piegza, a rate hike, which she still considers highly unlikely, would only come after six consecutive months of rising inflation data.\u00a0<\/p>\n For now, the Fed has been clear that it\u2019s in a holding pattern<\/a> on rate cuts (or hikes) until it gets more promising inflation data. For her part, Piegza thinks that waiting game means there won\u2019t be any rate cuts in 2024.\u00a0<\/p>\n \u201cInflation is still very sticky,\u201d Piegza said. \u201cThe economy\u2019s still relatively solid. The consumer is losing momentum, but still out in the marketplace spending. It\u2019s going to be very difficult for the Fed to justify a rate reduction. They\u2019re on track for an eventual reduction, but increasingly looks like a 2025 event to me.\u201d<\/p>\n In recent weeks Fed officials have also mentioned the strength of the labor market as a reason to hold off on any changes to interest rates. The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari called the current low levels of unemployment a \u201cluxury<\/a>\u201d for the U.S. economy. The latest data shows a labor market with fewer job openings<\/a> compared to the post-pandemic heyday. But nonetheless, there were still more job openings than workers available to fill them.\u00a0<\/p>\n \u201cWe are continuing to see this idea that labor demand is still outpacing labor supply perpetuating the notion of wage pressures and adding further uncertainty to that longer term outlook for inflation that the Fed is desperate to return to that 2% target,\u201d Piegza said.<\/p>\n As Wall Street waits with bated breath for any hint from the Fed about its next moves, Piegza\u2019s boss Kruszewski issued a warning from his that things could get worse. \u201cEvery hard landing starts with a soft landing,\u201d\u00a0 Kruszewski cautioned.<\/p>\n<\/div>\n\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n