According to Federal Reserve Chair Jerome Powell, given the high level of U.S. inflation, which exceeds the Federal Reserve’s target of 2%, and the tight labor market, a majority of the central bank’s policymakers anticipate the need to raise interest rates at least two more times before the end of the year.
In a speech prepared for a Banco de Espana conference on financial stability in Madrid, Powell reiterated his recent observations on the economy and policy. He did not specify the exact timing of these rate hikes because measure that manage “expectations” need the element of surprise but of course you’ ll never hear that from official lips… Powell acknowledged that the banking stresses observed in March could result in tighter credit conditions beyond what would be expected from interest rate increases alone. He also emphasized the persistent issue of elevated inflation and the considerable progress that still needs to be made in achieving the Fed’s goal of 2% inflation. Despite implementing ten consecutive rate hikes since March 2022, the Federal Open Market Committee, responsible for setting the Fed’s policy rate, recently decided to keep it unchanged within the range of 5% to 5.25%.
