Washington, August 13 : US Federal Reserve officials meet next month to determine whether to raise interest rates for the 12th time to cool the economy or hold them steady.
Some officials think the Fed has already raised its benchmark lending rate enough to curb inflation, but others think it’s too soon to tap the brakes, CNN reported.
It’s clear the central bank has become divided. But right now, financial markets see more than a 90 per cent chance the central bank will agree to pause rate hikes next month, according to the CME FedWatch tool.
“We saw the beginning of the division within the Fed in the minutes for the June meeting,” Rajeev Sharma, managing director of fixed income at Key Private Banksaid, CNN reported.
“Some Fed members were opposed to the pause and wanted to go full steam ahead, but they came around, knowing that there would probably be a hike in July.”
Indeed, Fed officials unanimously voted to increase ratesby a quarter point to a range of 5.25-5.5 per cent, the highest level in 22 years. And Fed Chair Jerome Powell maintained a hawkish tone on fighting inflation in his post-meeting news conference, making it clear that another increase is still in the cards, CNN reported.
His remarks at an annual economics symposium in Jackson Hole, Wyoming, later this month will set the narrative straight and may give a hint about the Fed’s upcoming September decision.
Inflation’s steady slowdown in recent months has been comforting for both everyday Americans and investors. Financial markets have become hopeful that July marked the end of rate hikes, and are pricing in rate cuts as soon as next year — even though the Fed has continued to express hawkishness to keep markets in check, in case inflation proves to be more resilient than expected and central bankers decide to hike again, CNN reported.