American Central Bank Expects Further Rate Hikes to Curb High Inflation

Additional Rate Hikes Expected to Curb High Inflation, Says Fed Governor

In an effort to combat persistently high inflation, a governor of the American central bank (Fed) has estimated that “additional rate hikes will be necessary.” Michelle Bowman, speaking at a conference hosted by the Fed’s Cleveland regional office, expressed her belief that these rate hikes are needed to bring inflation back to the target of 2%.

While supporting the Fed’s decision on June 14 to pause rate increases for the first time since March 2022, Bowman emphasized the need for further action. She noted that although monetary policy tightening has had some impact on economic activity and inflation, core inflation (excluding food and energy) has stagnated since the fall of 2022. To achieve a sufficiently tight monetary policy stance and significantly reduce inflation, Bowman expects the rate to be raised further.

However, the governor did not specify the extent to which she considers it necessary to raise the key rate. Fed Chairman Jerome Powell, who also addressed a House of Representatives committee, echoed Bowman’s sentiment, stating that rates would likely resume their ascent. Powell suggested that it may be prudent to raise rates at a more moderate pace, given the progress made thus far.

According to Powell, “almost all” Fed officials anticipate it will be appropriate to raise interest rates somewhat further by the end of the year, with a “large majority” in favor of two increases.

Powell’s testimony before Congress is ongoing, with a hearing scheduled before a Senate committee. The next Fed meeting is set to take place on July 25-26.

What is the anticipated magnitude of the rate increases necessary to tackle high inflation, as mentioned by Governor Michelle Bowman and Fed Chairman Jerome Powell

Additional Rate Hikes Expected to Tackle High Inflation, Says Fed Governor

In a bid to combat persistently high inflation, a governor of the American central bank (Fed) has suggested that “further rate hikes will be necessary.” Speaking at a conference hosted by the Fed’s Cleveland regional office, Michelle Bowman expressed her belief that these rate hikes are crucial to bring inflation back to the target of 2%.

While supporting the Fed’s decision on June 14 to halt rate increases for the first time since March 2022, Bowman stressed the need for additional measures. She observed that although monetary policy tightening has had some impact on economic activity and inflation, core inflation (excluding food and energy) has remained stagnant since the fall of 2022. To achieve a sufficiently strong monetary policy stance and significantly reduce inflation, Bowman anticipates the need for further rate hikes.

Nevertheless, the governor did not specify the exact magnitude of the rate increases she deems necessary. Fed Chairman Jerome Powell, who also addressed a House of Representatives committee, echoed Bowman’s sentiments, stating that rates are likely to resume their upward trajectory. Powell suggested that a more moderate pace of rate hikes may be prudent given the progress achieved thus far.

According to Powell, “almost all” Fed officials anticipate that it will be appropriate to raise interest rates somewhat further by the end of the year, with a “large majority” in favor of two increases.

Powell’s testimony before Congress is ongoing, with a scheduled hearing before a Senate committee. The next Fed meeting is scheduled for July 25-26.