So far, most officials have signaled that the bias is toward a hike in July, after they voted to hawkishly pause last month.īut the decision in September will be a difficult one because the Fed will have to decide whether to get its second hike out of the way or wait for worse signs that inflation is not on track to hit the central bank’s target of 2%. The minutes from that meeting showed officials weren’t as united in their decision, even though they eventually voted to pause unanimously. Officials voted to hold rates steady at a range of 5-5.25% to reassess the economy’s health, but mostly over uncertainty about how bank stresses from the spring would affect access to credit. The Fed is overwhelmingly expected to raise its key federal funds rate later this month after it paused in June after 10 straight rate hikes. That means there’s a dangerous risk Americans could simply begin to accept permanently higher prices if inflation doesn’t come down soon.īusinessperson Hands Giving Cheque To Other Person AndreyPopov/iStockphoto/Getty ImagesĪmericans' wages are finally outpacing inflation. The longer inflation remains elevated, “the greater the risk of inflation expectations becoming unanchored,” according to the minutes from the June meeting. In other words, if inflation’s slowdown stalls, the labor market remains strong by historical standards and if the economy’s expansion cools only marginally, it would be best to rip the bandage off and hike in September. “If inflation does not continue to show progress and there are no suggestions of a significant slowdown in economic activity, then a second 25-basis-point hike should come sooner rather than later, but that decision is for the future.” “From there, I will need to see how the data come in,” he said. “Since the June meeting, with another month of data to evaluate lending conditions, I am more confident that the banking turmoil is not going to result in a significant problem for the economy, and I see no reason why the first of those two hikes should not occur at our meeting later this month,” Waller said at a Money Marketeers of New York University forum on Thursday.īut he also suggested that the Fed prefers to get rate hikes over with as soon as possible. Why the bias is toward hiking in Septemberįed Governor Christopher Waller, who has a permanent vote on the Fed committee that decides interest rates, doubled down late last week on the widely held view among Fed officials that two more rate hikes are needed this year. Right now, it seems like the hawks outnumber the doves. That’s why the vote in June was unanimous, despite the debating that was evident from the meeting minutes, released earlier this month. The central bank has a tradition of collegiality, meaning that although officials debate their views, they still respect the view of the majority. Fed Chair Powell has said the Fed still has more work to do, and he himself hasn’t ruled out back-to-back rate hikes. What is clear, however, is that the Fed chair historically has a major influence in the Federal Open Market Committee, the Fed’s monetary policymaking arm. The debate over pausing at the Fed was intense, minutes show The US Federal Reserve expects to continue raising interest rates but to slow down the pace of hikes, Fed chair Jerome Powell told a Congressional hearing Wednesday. Federal Reserve Board Chairman Jerome Powell testifies before a House Financial Services Committee hearing on the Federal Reserve's Semi-Annual Monetary Policy Report, on Capitol Hill in Washington, DC, on June 21, 2023.
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