Inflation is declining — future rate hikes prove.
Rugaber 23 — Christopher Rugaber, Economics Reporter for Associated Press, holds an M.A. in political science from American university, holds a B.A. in English from Dickinson College, 2023 (“Fed’s Powell: More rate hikes are likely this year to fight still-high inflation,” The San Diego Union, June 21st, Available Online at https://www.sandiegouniontribune.com/business/nation/story/2023-06-20/powell-to-face-capitol-hill-hearing-at-a-time-of-rising-uncertainty-over-feds-interest-rate-plans, Accessed 06-24-2023)
With inflation still well above the Fed’s 2% target, most economists have said they believe that a rate hike at its next meeting in late July is all but assured. What actions the central bank might take after that remains much less clear. The policymakers indicated last week that they expect to raise rates twice more this year. Yet they might not follow through if economic data suggests that inflation is falling quickly back to their target level.
Speaking at a news conference last week, Powell said there were no plans to raise rates at every other meeting or to follow any other particular time frame. Instead, as he reiterated Wednesday, Fed officials will monitor economic data and make their rate decisions “meeting by meeting.”
The central bank’s streak of rate increases have made borrowing for consumers and businesses more expensive across a range of loans, including home and auto loans, credit cards and business borrowing. The goal has been to cool inflation by slowing spending and hiring.
Last year, the Fed jacked up its benchmark rate at a breakneck pace, including by three-quarters of a point on four occasions. Now, with year-over-year inflation having eased from 9.1% a year ago to 4%, Powell has indicated that the Fed wants to move much more slowly.
A slower pace of rate increases, Powell has said, could help the Fed achieve a tricky feat: Weaken the economy enough to tame inflation, without undermining it so much as to cause a deep recession.