Thursday, August 11, 2022

Fed officials vow to fight inflation, rate cuts unlikely next year

Federal Reserve officials on Tuesday expressed their determination to continue fighting to keep inflation down, as one said next month.rate increaseTwo yards may be enough to get there.

St. Louis Fed Chairman James Bullard said he prefers a “front-loaded” strategy of sharp rate hikes and expects federal fundingRate of interestIt may reach 3.75%-4% by the end of the year. His colleagues, Thomas Barkin and Neil Kashkari, the presidents of the Fed Banks in Richmond and Minneapolis, said,Central bankA recession is possible while working to keep inflation down.

San Francisco Fed Chair Mary Daly still believes the central bank can keep inflation under control without causing massive unemployment and recession. She said in an interview with Reuters that she would “start with a reasonable view of a 50 basis point increase in September” because she believed she saw evidence of a turnaround, “but if inflation continues to rise.” If the labor market is not slowing down, there are indications that a 75 basis point increase may be more appropriate.”

In an interview with financial media CNBC, Bullard said: “We will still have a restrictive monetary policy. Rates should be raised to 3.75%-4% this year. Doing it in one or several sittings is a good question.” I like the advance rate. Interest strengthens our credibility to fight inflation.”

Statements from Fed chairmen this week emphasized that inflation, the worst in 40 years, has not slowed, countering the notion that the central bank may turn to easing monetary tightening. Fed Chairman Paul Powell last week, citing FOMC members, expected the benchmark rate to rise to 3.4% by the end of this year and 3.8% in 2023.

Bollard said before the central bank thinks it has done enough, it must see strong evidence that headline and other key inflation rates have fallen across the board. After that, the Fed is likely to keep interest rates on hold longer enough to see price growth slowing across the board.

Kashari, who has not voted on monetary policy this year, said it is highly unlikely that the Fed will cut rates next year. “Some financial markets are showing that they expect us to cut rates next year,” he said. “I wouldn’t say it’s impossible, but based on what I know about inflation dynamics, it looks like a very unlikely scenario now. A more likely scenario is to keep raising rates and stop when Till we are convinced that inflation will come back to 2%.”

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