Main Topic: The U.S. Federal Reserve's need to raise interest rates further to bring down inflation.
Key Points:
1. Governor Michelle Bowman supports the Fed's quarter-point increase in interest rates last month due to high inflation, strong consumer spending, a rebound in the housing market, and a tight labor market.
2. Bowman expects additional rate increases to reach the Fed's 2 percent inflation target.
3. Monetary policy is not predetermined, and future decisions will be data-driven. Bowman will consider consistent evidence of inflation decline, signs of slowing consumer spending, and loosening labor market conditions.
Experts are divided on whether the US Federal Reserve should raise its interest rate target to 3% to combat inflation and cushion against recessions, with some arguing that raising inflation targets would be futile.
Federal Reserve Bank of Philadelphia President Patrick Harker does not believe that the U.S. central bank will need to increase interest rates again and suggests holding steady to see how the economy responds, stating that the current restrictive stance should bring inflation down.
Federal Reserve Chair Jerome H. Powell stated in a speech at the Jackson Hole symposium that the central bank is prepared to raise interest rates further if needed, signaling that they do not believe inflation is fully under control. The Fed will proceed cautiously and assess economic data as they determine whether to make further policy adjustments.
The president of the Federal Reserve Bank of Philadelphia believes that the US central bank has already raised interest rates enough to bring inflation down to pre-pandemic levels of around 2%.
President of the European Central Bank, Christine Lagarde, stated that interest rates in the European Union will need to remain high to combat inflation, despite progress being made, emphasizing the challenges posed by disruptions in the global and European economies.
Cleveland Federal Reserve Bank President Loretta Mester believes that beating inflation will require one more interest-rate hike and then a temporary pause, stating that rate cuts may not begin in late 2024 as previously thought.
Top central bankers, including Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde, emphasized the importance of keeping interest rates high until inflation is under control while also grappling with economic challenges and uncertainties at the annual Federal Reserve gathering in Jackson Hole, Wyoming.
Atlanta Federal Reserve Bank President Raphael Bostic argues against further U.S. interest rate hikes, stating that current monetary policy is already tight enough to bring inflation back down to 2% over a reasonable period and cautioning against the risk of tightening too much.
The Federal Reserve's preferred inflation gauge increased slightly in July, suggesting that the fight against inflation may be challenging, but the absence of worse news indicates that officials are likely to maintain interest rates.
Bank of Canada Governor Tiff Macklem suggests that interest rates may not be high enough to bring inflation back down to target, emphasizing the need for further restrictive monetary policy to restore price stability.
Bond traders are anticipating that the Federal Reserve will continue with interest-rate hikes, and next week's consumer-price index report will provide further insight on how much more tightening may be required to control inflation.
The Federal Reserve should consider cutting its policy rate within the next six months to stabilize real rates and avoid tipping the economy into a recession, as financial stress in the real economy is rising despite slower hiring and inflation cooling, according to economist Joseph Brusuelas.
Rising energy costs are predicted to contribute to an increase in inflation rate, but it is unlikely to prompt the Federal Reserve to raise interest rates, though there may be another rate hike in the future.
Economist Campbell Harvey warns that the Federal Reserve should not raise rates later this year, as he believes a recession may occur in 2024 due to an inverted yield curve and potential distortions in Bureau of Labor Statistics and GDP figures.
The Federal Reserve faces the challenge of bringing down inflation to its target of 2 percent, with differing opinions on whether they will continue to raise interest rates or pause due to weakening economic indicators such as drops in mortgage rates and auto sales.
The Federal Reserve is expected to keep its benchmark lending rate steady as it waits for more data on the US economy, and new economic projections suggest stronger growth and lower unemployment; however, inflation remains a concern, leaving the possibility open for another rate increase in the future.
The Federal Reserve will continue raising interest rates until inflation decreases, even if it means more people losing their jobs, according to CNBC's Jim Cramer.
The U.S. Federal Reserve kept interest rates steady but left room for potential rate hikes, as they see progress in fighting inflation and aim to bring it down to the target level of 2 percent; however, officials projected a higher growth rate of 2.1 percent for this year and suggested that core inflation will hit 3.7 percent this year before falling in 2024 and reaching the target range by 2026.
Central banks around the world may have reached the peak of interest rate hikes in their effort to control inflation, as data suggests that major economies have turned a corner on price rises and core inflation is declining in the US, UK, and EU. However, central banks remain cautious and warn that rates may need to remain high for a longer duration, and that oil price rallies could lead to another spike in inflation. Overall, economists believe that the global monetary policy tightening cycle is nearing its end, with many central banks expected to cut interest rates in the coming year.
The Federal Reserve's measure of inflation is disconnected from market conditions, increasing the likelihood of a recession, according to Duke University finance professor Campbell Harvey. If the central bank continues to raise interest rates based on this flawed inflation gauge, the severity of the economic downturn could worsen.
Federal Reserve policymakers Governor Michelle Bowman and Boston Fed President Susan Collins expressed the need to keep interest rates elevated to combat inflation, with Bowman suggesting further rate hikes will likely be needed to bring inflation down to the Fed's 2% target and Collins stating that further tightening is not off the table as progress in battling inflation has been slow.
At least one more interest-rate hike is possible, according to Federal Reserve officials, who suggest that borrowing costs may need to remain higher for longer in order to address inflation concerns and reach the central bank's 2% target.
Despite predictions of higher unemployment and dire consequences, the Federal Reserve's rate hikes have succeeded in substantially slowing inflation without causing significant harm to the job market and economy.
The Bank of Ghana is expected to conclude its tightening cycle as falling inflation signals a stable economy, according to a Reuters poll, with interest rates likely to be cut in the coming months.
Minneapolis Federal Reserve Bank President Neel Kashkari believes that the Fed should raise borrowing rates further and keep them high for an extended period to bring inflation back down to the target of 2% due to the unexpected strength of the US economy.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
Overall inflation has moderated recently in the United States and euro area, but core inflation remains sticky, creating a challenge for central banks trying to meet their inflation targets. Financial conditions have eased, complicating the fight against inflation by preventing a slowdown in aggregate demand. The combination of loose financial conditions and a monetary policy tightening cycle may have dulled the effectiveness of monetary policy. There are risks of a repricing of risk assets and potential vulnerabilities in the financial sector, emphasizing the need for central banks to remain determined in their fight against inflation.
Federal Reserve Governor Michelle Bowman suggests that further interest rate hikes may be necessary to bring inflation back to the central bank's target of 2%, despite recent data showing slower price increases.
Federal Reserve officials indicate that monetary policy will remain restrictive for a while to bring inflation back to 2%, but there is ongoing debate over whether to increase rates further this year.
Atlanta Federal Reserve president Raphael Bostic stated that given the slowing economy and falling inflation, there is no immediate need for the Federal Reserve to raise interest rates, but it will likely be a while before rate cuts are appropriate.
The chaos in Washington and uncertainty surrounding a possible government shutdown could make it less likely for the Federal Reserve to raise interest rates again this year, as the economy and inflation appear to be cooling off.
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