“It is far too early to conclude that inflation has peaked,” an official of the American central bank (Fed) warned on Wednesday, anticipating further increases in key rates, to bring them above 4 % beginning of 2023.
“My current view is that it will be necessary to raise policy rates to just above 4% early next year and keep them there,” said Loretta Mester, President of the Cleveland Fed, during a speech at the Chamber of Commerce in Dayton (Ohio).
Faced with inflation at its highest for 40 years, but which however slowed down in July, to 8.5% over one year, according to the CPI index, the Fed has been gradually raising its key rates since March.
This increases the interest rates on loans granted by commercial banks to their private and business customers, in order to cause a voluntary slowdown in the economy, to relieve pressure on prices.
“The Fed still has work to do to control inflation,” said Ms. Mester, who in 2022 is a voting member of the Fed’s monetary committee, the institution’s decision-making body. This will “lead to an economic transition” to slower growth, as well as “slower job growth and a rising unemployment rate.”
However, despite the country’s two consecutive quarters of GDP contraction in the first half of 2022, “I don’t believe the US economy is currently in recession because the labor market remains very strong,” he said. she clarified.
The job market returned to its pre-Covid-19 level in July, with an unemployment rate of 3.5%, when all the jobs that had been destroyed are now being recreated. August figures will be released on Friday.
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“Although there is considerable uncertainty, I currently expect the US economy to return to growth in the second half of the year, but for this year as a whole and for next year, I I expect growth to be well below 2%,” the Cleveland Fed president said.
Fed Chairman Jerome Powell warned on Friday that fighting inflation would be painful, but giving up on it would be even more damaging to the economy.
The Fed’s key rates are in the range of 2.25 to 2.50%.