According to the Wall Street Journal, the Fed is facing a tough decision on whether to raise interest rates again this year, as some officials worry about inflation and others fear a slowdown in the economy.
The Fed has raised interest rates to a 22-year high of 5.25% to 5.5% in 11 of its last 12 meetings, the last of which was in July. However, he may pause the rate hike in September and discuss whether he will raise interest rates in November or December.
A group of officials is worried about inflation and is calling for a guarantee policy against it by raising rates again this fall. They argue that if inflation turns out to be higher than expected, then reversing course could be more devastating.
The CME FedWatch tool currently gives a 93% probability of a rate hike pause.
The other part, on the other hand, supports the interruption of interest rate hikes and wants interest rates to be kept at current levels. They point to signs of slowing growth in China and Europe, as well as the lagging impact of past interest rate increases on the US economy. They also view risks more conservatively and worry about triggering a downturn or a new period of financial turmoil by raising interest rates too much.
According to some economists, the difference between a rate hike and no rate hike may not be that big. But others warn that the Fed may make a policy mistake by relying too much on retrospective data and ignoring forward indicators that the economy may not be able to handle higher interest rates.
The next FOMC meeting will be held on September 19-20, 2023.
*Not investment advice.
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