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It is too early to declare victory and end the cycle of rising interest rates, a member of the US Federal Reserve (Fed) said on Tuesday, while acknowledging that inflation was now moving in the right direction. “I’m not ready to announce that we’re done but I see positive signsMinneapolis branch president Neel Kashkari said at a conference in the northern US city.

Over the past 18 months, the Fed has raised its rates eleven times in order to invert the inflation curve and bring it back towards its long-term target, around 2%. At its peak in June 2022, at over 9%, inflation has since slowed sharply, returning to around 3% over one year in July, but remains above the target, even more so if we focuses on core inflation, ie excluding food and energy.

The Fed must thereforetake the time necessary to have enough data to decide whether we should proceed or not(the rises), recalled Neel Kashkari. While rates were raised again at the last meeting in late July, markets are broadly expecting another pause at the next meeting in mid-September, after the one seen in early June.

«I want to see convincing evidence that inflation is indeed on the verge of returning to 2%, then it will take some time to stabilize it there“, replied Neel Kashkari to a question on the advisability of a possible rate cut. The Fed could, however, according to him, start to lower its main rate in 2024, if the deceleration of inflation is confirmed.

«At some point, someone will think it reasonable to cut rates to keep monetary policy at the desired level“, he said. “Can this happen next year. It is certainly possible. Or the following year, it will depend on the data so we will have», concluded Neel Kashkari.

2023-08-16 04:14:02


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