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 signs, said Minneapolis branch president Neel Kashkari at a conference in the northern US city.
Over the last 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, more than 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 consider focuses on core inflation, ie excluding food and energy.
The Fed must therefore take the necessary time in order to have enough to give to decide whether or not we should continue (the increases), reminded Mr. Kashkari.
Although rates were increased again during the last meeting, at the end of July, the markets are globally expecting a new pause during the next meeting, in mid-September, after the one observed at the beginning of June.
I want to see convincing evidence that inflation is indeed on the verge of returning to 2%, it will then take some time to stabilize it there, replied Mr. Kashkari when asked about the desirability of a possible rate cut.
The Fed could however, according to him, begin 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 Mr. Kashkari.