The Federal Reserve is signaling a slower rate hike.
(Photo: Reuters)
Washington In the USA, there are increasing calls for interest rates not to be raised as much as in the previous months at the December meeting of the Fed. Atlanta Fed Chair Raphael Bostic said Saturday he was ready to back away from a 0.75 percentage point hike in December. The US Federal Reserve had raised interest rates by this rate at the past four meetings in order to curb high inflation.
According to the text of the speech, Bostic also said that he believes that the key interest rate should not rise by more than a further percentage point overall. It would then be in a range between 4.75 and 5.00 percent. “I believe that this level of interest rates will be sufficient to contain inflation over a reasonable time horizon,” said the central banker. At some point, however, the Fed will have to take a break from the hikes and “wait and see the economic momentum”. After all, it could take 12 to 24 months for the full impact of rate hikes to take hold.
But the central bank should be wary of cutting interest rates again before inflation is well on its way to falling to the Fed’s target of 2 percent – even if the economy weakens noticeably. “We want the public and markets to have a clear understanding of our targets, and that we work steadfastly to bring inflation back towards our 2% target,” Bostic said. Most recently, the US inflation rate was 7.7 percent.
In the USA, there are increasing calls for interest rates not to be raised as much as in the previous months at the December meeting of the Fed. Atlanta Fed Chair Raphael Bostic said Saturday he was ready to back away from a 0.75 percentage point hike in December. The US Federal Reserve had raised interest rates by this rate at the past four meetings in order to curb high inflation
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According to the text of the speech, Bostic also said that he believes that the key interest rate should not rise by more than a further percentage point overall. It would then be in a range between 4.75 and 5.00 percent. “I believe that this level of interest rates will be sufficient to contain inflation over a reasonable time horizon,” said the central banker. At some point, however, the Fed will have to take a break from the hikes and “wait and see the economic momentum”. After all, it could take 12 to 24 months for the full impact of rate hikes to take hold.
But the central bank should be wary of cutting interest rates again before inflation is well on its way to falling to the Fed’s target of 2 percent – even if the economy weakens noticeably. “We want the public and markets to have a clear understanding of our targets, and that we work steadfastly to bring inflation back towards our 2% target,” Bostic said. Most recently, the US inflation rate was 7.7 percent.
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