© Reuters
Investing.com – A U.S. government shutdown or a prolonged strike by auto workers could slow the economy, meaning the Federal Reserve may not have to use its tools to lower inflation, said Neel Kashkari, president of a bank in Minneapolis.
He added in an interview Wednesday on CNN. “If our price increases so far do not slow the economy in the way we expect, there is a risk that we may have to raise them again.”
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Officials last week left the benchmark interest rate unchanged in a range of 5.25% to 5.5%, the highest level in 22 years, and indicated that rates would need to stay higher for longer to contain inflation.
The PCE Price Index, the Fed’s preferred measure of inflation, rose 0.2% in July, marking the smallest consecutive monthly increases since late 2020. The core PCE Price Index, which excludes volatile food and energy components, also rose 0.2%. % in July for the second month, underscoring the progress the Fed has made in taming prices.
In an article published Tuesday on the Minneapolis Fed’s website, Kashkari laid out two possible scenarios for the Fed’s future response to inflation. The first, a “soft landing” path, of 60%, would likely see policymakers raise interest rates again before stabilizing them in order to fully cool inflation. In the other case, which I attribute to a 40% probability, inflation will be more entrenched and require further interest rate increases to be brought under control. That is, interest will be raised in both cases.
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Markets reaction
Gold prices consolidated their losses immediately after Kashkari’s statements were issued, as they are now declining by 0.52% to $1,909 per ounce.
It fell by 0.45% to $1892 per ounce.
On the other hand, it rose by 0.21% to 106.162 points.
2023-09-27 12:15:00
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