Fed divided on US interest rates, inflation

Published May 25th, 2023 - 09:24 GMT
Fed divided on US interest rate hikes, inflation
US interest rates - Source: Shutterstock

'The hard part is coming' – Atlanta Fed chief on US interest rates

ALBAWABA – Members of the United States (US) Federal Reserve Board (Fed) are divided on raising US interest rates in the coming months, Atlanta Fed Chief Raphael Bostic told the Minnesota Public Radio’s business and markets news outlet, Marketplace, Wednesday.

The central bank, i.e. the Fed, will have to be resilient as to whether or not further rate hikes are necessary, Bostic explained.

Fed divided on US interest rate hikes, inflation
Atlanta Fed Chief Raphael Bostic speaking at a forum - Source: Marketplace

According to Investing.com, other members of the Fed board stated that they expect US interest rate cuts as early as September this year, and so do some economists and traders, as reported by Reuters.

“We’re going to let the data guide us, and we don’t want to be locked into any particular movement,” he said.

According to Bostic, the economic situation is bound to get worse before it gets better.

The Fed’s number one priority is to bring inflation down to 2 percent, the Atlanta chief explained.

Moving forward, whether or not the Fed does raise interest rates, the labor market will face difficulties, he added, and the public will put pressure on the central bank to address upcoming economic issues.

However, “failing in getting the inflation back to the 2 percent target will be much more problematic for the economy,” Bostic reaffirmed.

Debate is ongoing, he said, as to the timeframe for achieving the target, he said. 

“We [the Fed] won’t be thinking about a [fed rate] cut until well into 2024,” the chief underlined.

In a statement last Wednesday, Bostic said that the economy is just now beginning to reflect the results of the Fed’s aggressive rate hikes.

Inflation, in April, had slightly slowed down to 4.9 percent, from over 5 percent in March.

In just a little over a year, the Fed raised US interest rates by nearly 5 to 5.25 percent in an effort to curb rising inflation rates.

Meanwhile, experts estimate that the Fed may have raise interest rates up to around 6 percent.

Raphael Bostic, president and CEO of the Federal Reserve Bank of Atlanta, is not a voting member of the Federal Open Market Committee, the Fed body that sets interest rate policy. But he attends all of the committee’s meetings, including its latest session, when the committee voted to raise interest rates for the 10th consecutive time, Marketplace reported.

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