U.S. Federal Reserve officials became more resolved last month to keep raising interest rates for longer to prevent higher inflation from becoming entrenched, even if that slowed the U.S. economy.
Federal Reserve officials became more resolved last month to keep raising interest rates for longer to prevent higher inflation from becoming entrenched, even if that slowed the US economy.
The record was heavy with references to price pressures and why they might take time to ease. Officials “recognized that policy firming could slow the pace of economic growth for a time, but they saw the return of inflation to 2 per cent as critical to achieving maximum employment on a sustained basis.”
“They can lose the battle on the economy, but they can’t lose the war on the inflation anchor,” said Mark Spindel, chief investment officer at MBB Capital Partners LLC. “Powell’s telling you, ‘We’re not blinking’.”Officials hiked their benchmark rate to a target range of 1.5 per cent to 1.75 per cent in June and Chair Jerome Powell suggested they could do the same thing again in July.
The personal consumption expenditures price index, which the Fed uses for its inflation target, has risen 6.3 per cent since May 2021 -- more than three times the central bank’s 2 per cent target.
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