Federal Reserve Signals Possible Interest Rate Increase
Federal Reserve Governor Michelle Bowman hints at the need for an interest rate increase to combat high inflation, while Wall Street revises its rate cut predictions for next year.
Federal Reserve Governor Michelle Bowman stated that it may be necessary to raise interest rates further due to persistently high inflation. In a speech delivered to Colorado bankers, Bowman acknowledged the significant progress made in lowering inflation but emphasized that more work needs to be done.
The central bank aims to keep interest rates elevated for an extended period until inflation reaches its target of 2%. Currently, inflation stands at twice that rate. The Federal Reserve recently kept its benchmark short-term interest rate unchanged within the range of 5.25% to 5.5%. However, the possibility of another rate hike before the end of the year remains open if inflation fails to slow down towards the Fed's target.
In a surprising revelation to Wall Street, senior officials at the Federal Reserve have revised their predictions for next year. They now anticipate only two rate cuts, as opposed to the four projected earlier in June.
The next course of action for the Fed appears to be a topic of division within its inner circle. Out of the 19 top officials, 12 predicted another rate hike by the end of this year, while seven believe that interest rates have already reached their peak.
Moving forward, senior officials will closely monitor forthcoming reports on inflation and employment growth as they evaluate their next steps.