U.S. Federal Reserve Chairman Jay Powell warned U.S. interest rates would peak at a higher level than expected after hiking its main interest rate by 0.75 percentage points in an increasingly desperate attempt to quell rampant U.S. inflation running at 40-year highs.
Colby Smith for Financial Times:
Speaking after the central bank increased its main interest rate by 0.75 percentage points for the fourth time in a row, Powell warned the Fed had “some ways to go” in its quest to tame soaring prices and pointed to a string of economic reports suggesting it has yet to make a dent in inflation.
“Data since our last meeting suggests that the ultimate level of interest rates will be higher than expected,” the Fed chair added.
However, Powell also hinted that policymakers are willing to entertain the possibility of adopting a less aggressive increase at the Fed’s next meeting in December. “That time is coming, and it may come as soon as the next meeting, or the one after that… We do need to see inflation coming down decisively and good evidence of that would be a series of down monthly readings.”
Powell was speaking after the Federal Open Market Committee voted unanimously to increase the federal funds rate to a target range of 3.75 per cent to 4 per cent.
The central bank said “ongoing increases” in the fed funds rate would be necessary to have a “sufficiently restrictive” effect on the economy and bring inflation back to the Fed’s longstanding 2 per cent target.
The decision to press ahead with another 0.75 percentage point rate rise comes against a backdrop of mounting evidence that the most acute inflation problem in decades is not abating.
MacDailyNews Take: Again, when certain quarters, including the Fed, delude themselves and others that “inflation is transitory” and waste at least a year before doing a mere portion of what is necessary* (interest rate hikes), the price will be paid for being delusional and late.
Catching up will be difficult. But, hey, good luck on that soft landing. 🙄 – MacDailyNews, September 13, 2022
In January, Interactive Brokers founder Thomas Peterffy said of the U.S. Federal Reserve, “If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”
Peterffy may have been too conservative. Rates in excess of 6% may be required at this point. – MacDailyNews, October 13, 2022
‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021
*Stop the misguided crusade against domestic energy production and profligate federal spending and inflation will be stopped dead in its tracks. It’s not difficult. – MacDailyNews, May 11, 2022
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