The Fed should resume its rate hikes, after the pause marked last week, again hinted on Wednesday its president, Jerome Powell, hammering that “almost all” the leaders of the institution anticipate having to raise them again from here. the end of the year.
Almost all of the institution’s officials, governors and regional branch presidents, expect it to be appropriate to raise interest rates a little further by the end of the year, Jerome Powell told officials. elected members of the House of Representatives, during his semi-annual hearing before a committee.
On June 14, the Fed marked a pause in its key rate increases, for the first time since March 2022, and after 10 increases, by 5 points in total. Rates are now within the range of 5 to 5.25%.
At last week’s meeting, given where we were coming from and the speed at which we were moving, we thought it prudent to hold rates where they were, to allow Fed officials to assess the news and its implications for monetary policy, stressed Jerome Powell.
These rate hikes, which encourage commercial banks to offer higher rates for loans to households and businesses, are intended to slow down economic activity, in order to ease the pressure on prices, and to slow down inflation.
This remains well above our long-term objective of 2%, further indicated the Chairman of the Fed.
Thus, to determine how much further they will need to tighten their monetary policy to achieve this objective, we will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, as well as the economic and financial development, he added.
But reducing inflation will likely require a period of below-trend growth, warned Jerome Powell.
The next Fed meeting will be July 25-26.
Jerome Powell had already, on June 14, after the announcement of the decision of the monetary policy committee, specified that the leaders of the institution were anticipating the majority of additional rate hikes. However, he had mentioned a moderate pace.