WASHINGTON, Aug 26 — With US inflation at a 40-year high, economists say there is no doubt about the Federal Reserve's policy course: interest rates will continue to rise.
Modest signs of slowing in the world's largest economy and easing price pressures spurred hope in financial markets that the central bank might ease up on its aggressive rate hikes, and perhaps even start to reverse course next year."I think there's wishful thinking on the part of the markets," said Posen, who leads the Peterson Institute for International Economics in Washington.
In the battle to contain red-hot US inflation, which topped nine percent in June, the Fed has hiked rates four times, including massive, three-quarter point increases in June and July — steep moves unheard of since the early 1980s -- to the current level of a range of 2.25 to 2.5 percent.The Fed's preferred inflation measure, the personal consumption expenditures price index, fell 0.1 percent in July a dramatic slowdown from the 1.0 percent surge in June.