Interest Rates Likely to Rise Once More. Federal Reserve (The Fed) Bank of Cleveland President Loretta Mester said that the US central bank would likely need to raise interest rates once again this year and then keep them at a higher level for some time to return inflation to its 2 percent target.
However, Mester said that the final decision would depend on how the global economy develops. This, he said, pointed to a slowdown in China, the possibility of an extended strike by members of the United Auto Workers union, and a potential government shutdown as risks to the outlook for inflation and growth.
He suspects that perhaps the Fed will need to raise interest rates or the Fed Funds Rate once again this year and then hold it for some time. Meanwhile, the Fed will collect more information on economic developments and assess the impact of the tightening financial conditions that have occurred.
Interest Rates Likely to Rise Once More. Mester, who is not voting on monetary policy this year, said that the US inflation rate is still too high and the risks are still “leaning to the upside.”
According to her, rising gas prices are resonating strongly with consumers, who can expect inflation to start rising again. Fed officials last month left the benchmark interest rate target range unchanged at 5.25 percent to 5.5 percent, the highest level in 22 years.
Projections published at the same time showed 12 of 19 policymakers forecast one more rate hike for this year, and fewer rate cuts in 2024 than previously anticipated, partly because of a better outlook for the labor market.