Federal Reserve Officials Expect Interest Rates to Rise Again by Year-End
The chairman of the Federal Reserve, Jerome Powell, has stated that “almost all” officials of the institution anticipate the need to raise interest rates again by the end of the year. This comes after the Fed’s decision to pause rate hikes last week.
During a semi-annual hearing before a committee of elected members of the House of Representatives, Powell emphasized that the majority of governors and regional branch presidents expect it to be appropriate to raise interest rates further in order to achieve the institution’s objectives.
The Federal Reserve had previously marked a pause in its key rate hikes on June 14, the first time since March 2022. After a total of 10 hikes, rates currently range from 5 to 5.25%.
Explaining the decision to pause, Powell stated that it was prudent to assess the information and its implications for monetary policy. The rate hikes are aimed at slowing economic activity to ease pressure on prices and slow inflation, which remains well above the long-term objective of 2%.
To determine the extent of further tightening of monetary policy needed to achieve their objectives, Powell highlighted that the cumulative tightening of monetary policy, the lags with which it affects economic activity and inflation, as well as economic and financial developments, will be taken into account.
However, Powell warned that reducing inflation will likely require a period of below-trend growth. The next Federal Reserve meeting is scheduled for July 25-26.
Powell had previously mentioned a moderate pace of additional rate hikes after the announcement of the monetary policy committee’s decision on June 14.
The anticipation of further rate hikes by Federal Reserve officials reflects their commitment to maintaining economic stability and achieving their inflation objectives.
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The chairman of the Federal Reserve, Jerome Powell, recently stated that the majority of officials within the institution anticipate the need to raise interest rates again by the end of the year. This comes after the Federal Reserve’s decision to pause rate hikes last week.
During a hearing before a committee of elected members of the House of Representatives, Powell emphasized that most governors and regional branch presidents believe it will be appropriate to further increase interest rates in order to achieve the institution’s objectives.
On June 14, the Federal Reserve announced a pause in its key rate hikes, marking the first time since March 2022. Currently, rates range from 5 to 5.25%, following a total of 10 rate hikes.
Powell explained that the decision to pause was made to assess the information and its implications for monetary policy. The rate hikes are aimed at slowing economic activity to ease pressure on prices and slow down inflation, which has remained well above the long-term objective of 2%.
To determine the extent of further tightening of monetary policy necessary to achieve their objectives, Powell highlighted that the cumulative tightening of monetary policy, the time lag in which it affects economic activity and inflation, as well as economic and financial developments, will all be taken into account.
However, Powell cautioned that reducing inflation is likely to require a period of below-trend growth. The next Federal Reserve meeting is scheduled for July 25-26.
Powell had previously mentioned a moderate pace of additional rate hikes after the announcement of the monetary policy committee’s decision on June 14.
The anticipation of further rate hikes by Federal Reserve officials reflects their commitment to maintaining economic stability and achieving their inflation objectives.
The anticipation of rate hikes by the Chairman of the Federal Reserve holds significant implications for the economy. These potential rate hikes signify a strengthening economy, but also bring challenges for businesses and consumers. It will be crucial to monitor how these changes impact borrowing costs, investments, and overall economic growth in the coming months.