“American Fed official calls for continued rate hikes to combat inflation”

By Le Figaro with AFP

Posted on 05/15/2023 at 19:02

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’s still a long way to go before we get inflation back to 2%, and we at the Federal Reserve probably still have some work to do on our end.“Said Neel Kashkari, president of the Minneapolis Fed, which this year has rotating voting rights at meetings.

The next Fed meeting will be June 13-14. The possibility of a pause in rate hikes is on the table. “Don’t 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 hammered. Indeed, he pointed out, inflation has certainly started to slow down, but “the labor market remains tight, and we haven’t seen much of a slowdownon that front. Another official, Chicago Fed President Austan Goolsbee, also a voting member, was more cautious on Monday, saying that “much of the impact (from rate hikes already done) is still in the pipelineand that, 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 the unemployment rate to 3.4%. The labor shortage in the country has indeed 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 to 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 May 26. To curb high inflation, the Fed has, since March 2022, raised its main key rate by 5 points, from 0 to 0.25%, to 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.