Live: Two officials at the US Federal Reserve explained that at least one more interest rate increase is possible, and that there is a need for high borrowing costs to continue for a longer period so that the bank can reduce inflation to return to its 2% target.
Boston Federal Reserve Bank President Susan Collins said that further monetary tightening is definitely not out of the question.
Bank Governor Michelle Bowman also indicated that there may be a need to approve an increase more than once, which supports her position as one of the most hawkish members of the Federal Open Market Committee.
“I still expect that further interest rate hikes will be needed to bring inflation back to 2% in due course,” Bowman told the Independent Bankers Association in Vail, Colorado, today.
While the Federal Open Market Committee on Wednesday maintained the target range for federal funds rates to range from 5.25% to 5.5% – the highest level in 22 years -; The new quarterly forecasts showed that 12 out of 19 officials favored raising interest rates again during 2023, which highlights the desire to ensure that inflation continues to decline in the United States.
One monetary policy maker expects that interest rates will peak above 6% next year, while US central bank governors generally see fewer cuts than previously expected during 2024, partly due to the strong labor market. Bowman’s statements indicate that she may have the highest expectations for interest rates for next year.
Collins – who does not have the right to vote on monetary policy decisions this year – indicated that she fully supports the guidance provided for the quarterly economic forecasts issued by Federal Reserve officials. Speaking at an event hosted by the Maine State Bankers Association today, Collins said the current phase of monetary policy will require “extensive patience.”
Bowman pointed out that while inflation is declining in a good way; High energy costs pose a risk to achieving the 2% inflation target.
She added: “I see a constant risk that energy prices may rise further, undermining some of the progress we have seen in curbing inflation in recent months.”
The US Federal Reserve Governor also indicated that the impact of monetary policy on lending operations appears to be less than expected.
She concluded: “Despite the tightening of bank lending standards, we have not seen signs of a significant decline in credit that would slow economic activity in a tangible way.”
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