Another Rate Increase Likely
The Federal Reserve will likely raise interest rates again in the near future, Chairman Jerome Powell said Wednesday, according to (subscription).
Whats going on: Powell said that because the Fed lifted rates so quickly last year, the effects havent been fully realized yet.
- Policy hasnt been restrictive for very long so we believe theres more restriction coming, Powell said during a panel discussion with other central bankers at the European Central Banks annual symposium in Sintra, Portugal.
- Core inflation will probably not reach the Feds target of 2% until 2025, Powell added.
The background: While central banks throughout the world have increased interest rates quickly in the past year in an effort to control inflation, they have been astonished so far at the resilience of their economies to higher borrowing costs.
- Earlier this month, the European Central Bank raised its rates a quarter percentage point. Last week, the Bank of England raised its key interest rate by a relatively aggressive half percentage point, citing a resilient economy, tight labor market and large pay increases for workers.
- At its meeting earlier this month, the Fed left the benchmark federal-funds rate at 5% to 5.25%, following 10 consecutive rate increases at prior meetings.
What it means: Slowing down rate increases, including by possibly raising rates at every other meeting, represents an effort to get more information from the data to see how much restraint is really coming, [Powell] said.
Whats next: Most central banksincluding the Bank of Englandwill probably raise rates again in the near future, according to the Journal.
