Fed officials say they haven’t decided yet how much to raise rates in September

By: News Team

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The authorities of the Federal Reserve of the United States did not comment on Thursday on the magnitude of the increase in interest rates that they will approve at their meeting on September 20 and 21, but they continued to insist that they will rise and remain high until inflation is controlled.

The Fed’s policy could cause an increase in unemployment and is beginning to curb spending by households and businesses, the president of the entity in Kansas City, Esther George, said on CNBC, although she assured that the US central bank will not cower. when following a more restrictive policy.

George said it remains “too early to say” whether a half or three-quarter point rate hike would be most appropriate at the September meeting.

However, he stated that “our mandate is quite clear, to return inflation to our objective” by raising rates enough to solve what he called a “fundamental imbalance” between the demand for goods and services and the economy’s capacity to produce them. or import them.

In an interview with Bloomberg, he said the target fed funds rate may have to rise above 4% to achieve the desired effect, needing to be kept high for some time.

“I think we’ll have to keep it … it could be above 4%. I don’t think that’s out of the question … They won’t know, I think, until they start looking at the data signals,” commented.

Philadelphia Fed President Patrick Harker had a similar message in comments to CNBC, though he seemed to see rates peaking slightly lower than George’s estimate.

“I’d like to see us say above 3.4% – that was the latest SEP (Summary of Economic Projections) median – and then maybe wait for a while,” Harker said. “I’m not on the side … of raising rates and then lowering them.”

As for next month’s decision, he said, he will have to see what the next inflation report shows. “I can’t tell if it’s 50 or 75 right now,” Harker said, adding that in the context of a historical record where quarter-point rate increases have been the norm, even a half-point increase is a move. “substantial”.

The Fed has raised rates at each of its meetings since March and the fed funds rate currently stands in a range between 2.25% and 2.5%. The last two increases were three-quarters of a point and the monetary authorities must now decide whether to maintain that rate or reduce it.

The interviews with George were broadcast before the start of the annual Kansas City Fed research symposium Thursday night, which will be held as an in-person event for the first time since 2019.

Fed Chairman Jerome Powell will speak to the conference on Friday, in remarks expected to outline where he thinks the Fed stands in its fight to rein in the worst spike in inflation in 40 years.

It will have to manage longer-term expectations about how high the Fed thinks rates may have to go, how long they’ll have to stay there and how the Fed might react if the economy weakens more than expected. But there is also a shorter-term focus on what the Fed will do when it meets in just under four weeks.

In an interview with The Wall Street Journal, Atlanta Fed President Raphael Bostic said “at this point, I would flip a coin” to decide between a half-point or three-quarters rate hike.

The Fed has two more key reports on inflation and more employment data ahead of the September meeting, including the latest reading of the personal consumption expenditures price index on Friday, and the August employment report in little over a week.

The update to the Gross Domestic Product for the second quarter showed that the economy contracted less than initially thought between April and June.

If the numbers remain strong, “then another 75 basis point move could be warranted,” Bostic said. He added that he will remain “determined” to keep rates high and “resist the urge” to cut them until inflation is “well on track” toward the Fed’s 2% target.

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