Global Central Banks : The Fed hiked rates 11 times in 17 months on Wednesday. They did this to keep inflation down. Short-term interest rates rose from 5.1% to 5.3%.
The Fed’s Powell was unclear about future interest rate increases in a press conference. In the past, the Fed hinted about future actions. Powell said officials may or may not raise rates in September. Powell did this intentionally, understanding inflation volatility and being cautious about claiming success too soon.
Powell said the economy is strong and will continue growing, despite higher interest rates. The Fed’s economists no longer predict a recession. Powell hopes for a positive outcome, like a “soft landing.” This means inflation will decrease gradually to the Fed’s 2% goal without excessive job losses.
Price increases have slowed in the past two years, but concerns remain among those in charge of money due to the fast-growing economy. This means inflation may not return to desired levels without more action. In May, the core inflation rate was 4.6%, same as last year. Core inflation excludes volatile items like food and energy.
Powell was relieved to see June’s inflation report wasn’t as bad as May’s, but he stressed the importance of ongoing evidence of decreasing inflation before making definitive statements. The question is whether the recent rate increase will be the last one. Powell said we have a ways to go in fighting inflation as previous rate increases haven’t fully taken effect.
The Fed’s September meeting is important, as they’ll have more economic data to review. They’ll review two reports on inflation, spending and earning data, and job and unemployment numbers. Some traders think the Fed may delay rate hikes. They think the Fed might discuss this in November instead of September.
People worry that as jobs grow, workers may demand higher wages due to inflation concerns. This may result in increased prices and ongoing inflation. Inflation rates are decreasing, giving hope for the Fed to lower inflation without causing a recession.
Buying stuff is important for economic growth. It’s good because it saves money and creates jobs. Some government employees think interest rate hikes have affected the economy. However, they suggest that more rate increases may be needed to control inflation.
Going from 9% to 3% inflation in one year was a decrease, but reaching the Federal Reserve’s goal of 2% will be harder and taklonger. Smart people believe in controlling and maintaining low inflation. This is true as the cost of renting a home is expected to decrease with more houses being built.
The Fed tightened credit, and now other central banks are doing the same. The ECB, BoJ, and BoE may hike rates. The Bank of England raised interest rates to a 15-year high.
The Fed raised rates to curb inflation. However, we’re unsure if they’ll raise rates again. Powell is optimistic about a soft landing, but it depends on economic data and inflation indicators in the coming months. As central banks address price concerns, the global economy will heavily influence future decisions.