Fed officials say end of rate hike cycle is near

The Federal Reserve it will likely have to raise interest rates further to reduce inflation that remains too high, but the end of its current tightening cycle is near, several US central bank officials said on Monday.

The fed has raised rates by 5 percentage points since March 2022 to reduce the highest inflation in the United States in four decades.

Bank policymakers opted last month to forgo a new increase to give themselves time to assess the still-unfolding effects of earlier borrowing cost hikes, though most also targeted at least two more increases through the end of 2023.

“We may need a couple more rate hikes this year to get inflation back to the 2% target set by the Federal Reserve on a sustainable basis.“said the president of the institution in San FranciscoMary Daly, during an act at the Brookings Institution, giving voice to the most common opinion among her colleagues.

However, he added that while the risks of doing too little remain greater than those of going too far on rate hikes, the two sides are balancing better as the fed is close to “the last part” of your upload cycle.

He also showed his full support for the June policy decision, along with a slow down approach that allows for a more “extreme” reliance on data. “We may end up doing less because we need to do less; we may end up doing just that; we may end up doing more. The data will tell us“, he pointed.

Policy makers are expected to fed raise rates at their meeting this month, which would place the official interest rate between 5.25% and 5.50%. What is not so clear is whether they will do it again at the September meeting, wait until November or just wait and let inflation smooth over time.

Fed Chairman Jerome Powell has said he cannot rule out back-to-back rate hikes to tackle stubbornly high inflation, which the central bank’s preferred gauge of personal consumption expenditures has fallen from a record low. from 7% last year to 3.8% in May, still almost double the entity’s target.

“We still have a little work to do”, commented the Vice President of Supervision of the fed, Michael Barr, in another act. “On a personal note, I’ll just say that I think we’re close.he declared.

In another event held on Monday, the president of the atlanta fedPresident Raphael Bostic reiterated his view that the Fed can be “patient” with rates and allow tightening to reduce inflation without further action by the central bank.

However, within the Fed there is still a camp that thinks just the opposite.

“In June I was in favor of raising rates a little more and, in view of the current situation, I still am.said the president of the cleveland fed, Loretta Mester, at an event held by the University of California at San Diego. Still, she asserted herself, “we are closer to the end of our hardening phase than the beginning”.

Source: Reuters