“We continue to see unexpectedly high levels of inflation,” she said Thursday at a “Fed listens” event in Cleveland.“We continue to see unexpectedly high levels of inflation,” she said Thursday at a “Fed listens” event in Cleveland.
“There is still more work to do to bring inflation down,” she added, echoing remarks from Chairman Jerome Powell in testimony to Congress this week. He also said higher rates are likely.The Fed skipped an increase in interest rates last week after 10 straight hikes since March 2022. Senior officials wanted more time to assess how much the economy is softening and whether inflation would continue to ease.
Still, the central bank’s official economic forecast also signaled two more increases this year. That would raise a key short-term rate to as high as 5.75% from near zero 15 months ago. The rate of U.S. inflation, based on the consumer price index, soared to a 40-year high of 9% last year. Price increases have slowed to the 4% to 5% range, but inflation is still well above the Fed’s 2% goal.
The danger of higher rates, however, is that they could trigger a U.S. recession and lead to widespread layoffs. The U.S. leading economic index fell in May for the 14th month in a row and keeps signaling a recession ahead.