Fed eyes more rate hikes even after unchanged meeting

The authorities of the Federal Reserve of USA warned on Friday of new increases in rateseven after leaving borrowing costs stable this week, and two officials said they are still not convinced that the battle against the inflation is over.

These statements were qualified with words like “patience” and the recognition that price growth has slowed.

But in the first public comments since the central bank agreed this week to keep its benchmark interest rate in the range between 5.25% and 5.50%, emphasis was placed on the possibility that rates will continue to rise and on the fact that Monetary policy will likely remain restrictive for longer than expected.

“Inflation remains too high and I hope it is appropriate for the (Federal Open Market) Committee to raise rates further and keep them at a restrictive level for some time to return inflation to our 2% target in a timely manner.” , Fed Governor Michelle Bowman said at a banking industry event in Colorado.

“It is likely that progress on inflation be slow given the current level of monetary policy tightening,” highlighted, noting that in projections issued by the Fed earlier this week inflation will remain above the 2% target “at least until the end of 2025.”

In other remarks to the Maine Bankers Association, Boston Fed President Susan Collins said further tightening of monetary policy “It’s not off the table.” although he also advised “patience” as the Fed tries to get the right signal from sometimes complex inflation data.

“It is too early to be confident that inflation will follow a sustainable path towards the 2% target,” Collins said, as job growth continues “above trend” and price increases in some parts of the service sector continue to cause concern.

“I expect rates will have to stay higher and for longer than previous projections suggested”.

San Francisco Fed President Mary Daly and Minneapolis Fed Chief Neel Kashkari are scheduled to speak later on Friday as the lockdown period ends. “silence” of the Fed after its monetary policy meetings.

This week, the central bank’s decision to maintain its benchmark overnight interest rate was unanimous.

Bowman said he was in favor of “conflicting data” that, together with the signs of economic growth “solid”, They also included some decline in inflation and evidence of slowing employment growth.

Collins currently has no vote on rate policy under a Fed system that rotates votes among the 12 Federal Reserve bank presidents each year.

New projections issued at the end of the policy meeting on Wednesday showed that 12 of the 19 Fed policymakers expect an additional quarter-point rate increase this year. The Fed has two sessions left scheduled in 2023, which will conclude on November 1 and December 13.

And in a notable development, officials projected that while they still hope to begin reducing interest rates next year as inflation falls, the path of cuts will be slower than anticipated.

Although opinions are diffuse, monetary policy authorities estimate on average only half a percentage point of rate cuts in 2024, compared to the decline of a full percentage point observed in their June quarterly outlook.

Source: Reuters