Fed Official Considers It Necessary to Continue Raising Rates Despite Positive Economic Data

An official of the American central bank (Fed) considered Monday necessary to continue to raise the rates, judging that there remains work to bring back inflation in the nails.

There is still a long way to go before we bring inflation back to 2%, and we, the Federal Reserve, probably still have work to do on our side, indicated Neel Kashkari, president of the Minneapolis Fed, which has the right this year to voting system during meetings.

The next Fed meeting will be June 13-14. The possibility of a pause in rate hikes is on the table.

Do not be fooled by a few months of positive data. We are still well beyond our 2% inflation target, and we need to finish the job, he said.

Indeed, he pointed out, inflation has certainly started to slow down, but the labor market remains tight, and we haven’t seen much slowdown on that front.

Another official, Chicago Fed President Austan Goolsbee, also a voting member, for his part, was more cautious on Monday, believing that much of the impact (from rate hikes already made) is still in the pipeline and therefore the economy will continue to slow down.

While a drop in job creations and a rise in the unemployment rate are expected to curb high inflation, the market rebounded unexpectedly in April, with 253,000 jobs created, against 165,000 in March, and a drop in the unemployment rate 3.4%.

The shortage of labor experienced by the country has in fact contributed to fueling inflation, as wages have risen sharply.

However, weekly jobless claims climbed in early May, reaching their highest level since October 2021.

Inflation slowed slightly in April, to 4.9% over one year from 5.0% in March, according to the CPI index. Over one month, however, it rebounded, 0.4% against 0.1% in March.

However, the Fed favors another measure of inflation, the PCE index, whose data for April will be published on 26 May.

To curb high inflation, the Fed has, since March 2022, raised its main key rate by 5 points, from 0 to 0.25%, 5.00-5.25%. This leads banks to raise the cost of the loans they offer to households and businesses, weighing on consumption and investment.