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.
### Summary
The majority of economists believe that the U.S. Federal Reserve will not raise interest rates again and may even cut them by the end of March, due to positive economic indicators and low unemployment.
### Facts
- 90% of economists polled expect the Fed to keep interest rates in the 5.25-5.50% range at its September meeting.
- Roughly 80% of economists expect no further interest rate increases this year.
- The Fed's preferred measure of inflation is not expected to reach its 2% target until at least 2025.
- Confidence in the economy's ability to avoid a major downturn has led to expectations that interest rates will remain higher for a longer period, causing fluctuations in bond markets.
- 23 economists predict one more rate increase this year, while two expect two more increases to 5.75-6.00%.
- A majority of 95 economists expect rates to decrease at least once by mid-2024, but there is no agreement on the timing of the first cut.
- Nearly three-quarters of economists believe that shelter costs, a main driver of inflation, will decrease in the coming months.
- The real interest rate may be adjusted by the Fed based on inflation, which could prompt a rate reduction next year rather than a stimulus.
Source: [Reuters](https://www.reuters.com/business/futures-touch-fifers-hopes-us-fed-rate-cut-rise-boosted-2019-08-23/)
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.
Two Federal Reserve officials, Boston Fed President Susan Collins and Philadelphia Fed President Patrick Harker, suggested that the Fed may be nearing the end of interest rate increases, although Collins did not rule out the possibility of further hikes if inflation doesn't decline.
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%.
The spike in retail inflation has raised uncertainty for investors and savers, with expectations of interest rate cuts being pushed to the next fiscal year and the possibility of a rate hike. The Reserve Bank of India projects inflation to stay above 5% until the first quarter of 2024-25, and food price pressures are expected to persist. While inflation may impact stock market returns, gold and bank deposit rates are expected to remain steady.
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 likely require one more interest-rate hike in the U.S. and then pausing for a while, although she may reassess her previous view of rate cuts starting in late 2024, and she aims to set policy so that inflation reaches the Fed's 2% goal by the end of 2025 to prevent further economic harm.
Former White House economist Kevin Hassett predicts that the Federal Reserve will raise interest rates again due to increasing inflation and energy prices.
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.
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.
The Russian central bank has raised its key interest rate to 13% in response to inflationary pressures and a weak rouble, and warns that rates will remain high for a considerable period of time, with further rate increases possible 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.
The Turkish central bank has increased interest rates by five points to 30% in an effort to combat soaring inflation, which is above expectations, and the bank suggests that more rate hikes are likely in the future.
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.
Billionaire investor Bill Ackman expects 30-year interest rates to increase further and sees inflation remaining high, while his hedge fund remains short on bonds.
The head of the European Central Bank, Christine Lagarde, stated that interest rates will remain high to combat inflation, despite acknowledging the impact it has on homeowners with variable interest rate mortgages, as upward pressure on prices persists in the eurozone.
Rising interest rates, rather than inflation, are now a major concern for the US economy, as the bond market indicates that rates may stay high for an extended period of time, potentially posing significant challenges for the sustainability of government debt.
The Federal Reserve will continue to raise interest rates as inflation resurfaces, according to Wall Street investor Caitlin Long, with big corporations benefiting while other sectors of the US economy are already in recession.
JPMorgan Chase CEO Jamie Dimon warns that the Federal Reserve could raise interest rates by another 1.5 percentage points, potentially reaching 7%, which would be the highest since 1990, and urges Americans to be prepared for the possibility.
Billionaire investor Bill Ackman predicts that the Federal Reserve is likely done raising interest rates as the economy slows down, but warns of continuing spillover effects and expects bond yields to rise further.
The Federal Reserve is facing a tough decision on interest rates as some officials believe further rate increases are necessary to combat inflation, while others argue that the current rate tightening will continue to ease rising prices; however, the recent sell-off in government bonds could have a cooling effect on the economy, which may influence the Fed's decision.
Underlying US inflation is expected to rise, supporting the idea that interest rates will need to remain higher for a longer period of time, as indicated by central bankers.
The Federal Reserve is expected to keep interest rates higher for longer due to the potential inflation caused by rising oil prices amid the escalating war between Israel and Hamas, according to billionaire venture capitalist Chamath Palihapitiya.
Higher-for-longer interest rates are expected to hinder U.S. economic growth by 0.5%, potentially leading unprofitable public companies to cut their workforce, according to strategists at Goldman Sachs, who also noted that the Federal Reserve's current benchmark rate is insufficient to cause a recession. Additionally, the firm warned that the high rates could increase the U.S. debt-to-GDP ratio to 123% over the next decade without a fiscal agreement in Washington.
The Federal Reserve officials suggested that they may not raise interest rates at the next meeting due to the surge in long-term interest rates, which has made borrowing more expensive and could help cool inflation without further action.
Investors are betting that the Federal Reserve may not raise interest rates again due to recent market moves that are expected to cool economic growth.
The recent inflation rate above the Federal Reserve's target could lead to another interest rate hike, making now a good time to get a home equity loan before rates potentially increase.
The Federal Reserve is expected to reach its 2% inflation target rate by early 2025 and is unlikely to raise interest rates in the near future, according to Mike Fratantoni, Chief Economist of the Mortgage Bankers Association. Fratantoni also predicts that the 10-year treasury rate will drop below 4% by the end of the year, leading to a decrease in mortgage rates over the next two years. The U.S. government's fiscal policy and debt limit impasse could continue to impact mortgage rates.
Federal Reserve Chair Jerome Powell indicated that the strength of the U.S. economy and tight labor markets could warrant further interest rate increases, countering market expectations that rate hikes had come to an end. Powell also acknowledged that inflation is still too high and further rate increases could be necessary.
Federal Reserve Chair Jerome H. Powell stated that the central bank may need to raise interest rates further if economic data continues to show strong growth or if the labor market stops cooling.
U.S. inflation slowdown is a trend, not a temporary blip, according to Chicago Federal Reserve President Austan Goolsbee, who believes the downward trend will continue and hopes that it does, while also expressing concern over rising oil prices and possible economic disruptions in the Middle East; Mortgage Bankers Association Chief Economist Mike Fratantoni suggests the Fed is likely done with interest rate hikes and may reach its 2% inflation target by early 2025, with a low probability of rate hikes in November or December; Philadelphia Fed Reserve President Patrick Harker believes interest rates can remain untouched if economic conditions continue on their current path, as disinflation is taking shape and the Fed's interest rate policy is filtering into the economy; Mortgage rates have been affected by the federal government's increasing spending and smaller revenues, leading to a heavier impact on mortgage rates this fall.
The Federal Reserve is cautious about raising interest rates as Treasury yields approach 5%, especially if it tightens financial conditions and impacts the economy.
Reserve Bank of Australia (RBA) Governor Michele Bullock warns that the bank will raise interest rates again if inflation rises and does not return to its target range of 2-3% within a reasonable timeframe, emphasizing the need to closely monitor incoming data.
