Officials raised their benchmark rate last month to a range of 5.25 per cent to 5.5 per cent, a 22-year high, after skipping a rate increase at their June meeting. Their most recent projections had one more rate increase penciled in this year.
Powell on Aug. 25 signalled that policy has shifted to a more deliberative phase where risk-management is now “critical.”as expected, saying recent readings on economic output and consumer spending have been strong. The economy grew at a 2.4-per-cent annualized pace in the second quarter, a surprisingly robust reading that prompted many economists to boost forecasts for the third quarter and reconsider odds of a recession.
“Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said. He also pushed back on speculation that the central bank could raise its inflation target, an idea that has been hotly debated mostly by academics in recent months.This advertisement has not loaded yet, but your article continues below.since reaching a four-decade high last year, though it remains above two per cent. The central bank’s preferred gauge, the personal consumption expenditures price index, rose three per cent in June from a year earlier, the slowest pace since early 2021.
Fed officials have said they’re expecting to keep rates in restrictive territory until they have concrete signs that inflation is on its way toward their two-per-cent goal, but that’s a much more subjective strategy that may lead to more open disagreements among policymakers.
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