Bill Perry, Depositphotos
On Wednesday, the Federal Reserve raised interest rates by another 25 basis points, to a 22-year high.
Federal Reserve Chairman Jerome Powell said at a press conference on Wednesday that one positive CPI reading, in June, isn’t enough to promise there won’t be more rate hikes, and warned that more rate hikes are possibly coming. Currently, interest rates now stand at 5.25%-5.50%, the highest point in 22 years.
Despite Powell being cautiously optimisitc over falling inflation rates, during the news conference, Powell said inflation has moderated somewhat since the middle of last year, but hitting the Fed’s 2% target “has a long way to go” and that we need to continue asessing “the totality of the incoming data” as well as the implications for economic activity and inflation.
“It is certainly possible that we will raise rates again at the September meeting,” Powell said. “And I would also say it’s possible that we would choose to hold steady at that meeting.”
Diana Swonk, chief economist at accounting giant KPMG, said while addressing the mixed messages that Powell seemed to be sending “It was about as clear as mud. They don’t want to declare victory too soon. They know inflation moves in fits and starts.”
“It is time for the Fed to give the economy time to absorb the impact of past rate hikes,” said Joe Brusuelas, U.S. chief economist at RSM. “With the Fed’s latest rate increase of 25 basis points now in the books, we think that improvement in the underlying pace of inflation, cooler job creation and modest growth are creating the conditions where the Fed can effectively end its rate hike campaign.”
In June, Powell warned that inflation likely won’t meet the Fed’s 2% target until 2025, signaling that more inflationary pressures are likely coming. Inflation fell to 3% last month, down from a high of 9.1% in June 2022.