The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public.
According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials grappled with reconciling substantial economic headline numbers with evidence of possible weakness, such as household employment figures pointing to a weaker labour market than indicated by payroll numbers or national income data showing more invalid results than prominent gross domestic product readings.
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According to Powell, it's best to slow down and take time to decide. Capital Economics' North America economist, Paul Ashworth, believes there will probably be a 25 basis point rate hike this month. While officials might consider another increase in September, signs of a slowdown in core inflation and the real economy will likely convince the Fed to hold steady. Rates will likely peak between 5.25% and 5.50%.
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