US monetary authorities are calling for a further sharp rise in key interest rates
According to Kashkari, the Fed should avoid premature rate cuts. In his opinion, a break in increases at the level of only 5.4% will be considered.
The Fed wants to lower inflation to a target of 2.0%.
Photo: Andrew Harrier/Bloomberg
According to a senior Fed representative, the key US interest rate is far from the end of the road. From his point of view, a pause in increases will only be considered at the 5.4% level, Minneapolis Federal District President Neel Kashkari said on Wednesday. Therefore, it is appropriate to further tighten monetary policy, at least in the upcoming meetings. In its December interest rate forecast, the US monetary authorities estimated an average level of 5.1% by the end of 2023.
Kashkari stressed that after a future pause, interest rates must be maintained at the level achieved for a “reasonable period of time” in order for monetary tightening to have an impact on the economy. In his view, the Fed should avoid cutting interest rates prematurely: “This would be a costly mistake, so interest rate cuts should only be done once we are convinced that we have really beaten inflation.”
The US Federal Reserve raised its key interest rate by half a percentage point in December – to the new range from 4.25 to 4.50%. Previously, he had raised interest rates four times in a row – by 0.75 percentage points each time. Fed Chair Jerome Powell signaled further hikes in 2023 given that inflationary pressures are expected to remain elevated. The Fed wants to lower inflation to a target of 2.0%. Recently, however, the inflation rate was still well above 7.1%, even if the tide of inflation was generally abating.
Reuters
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