Powell Suggests Rate Hikes. This Year Chairman of the Board of Governors of the Federal Reserve (The Fed) Jerome Powell hinted that the US central bank will continue its interest rate hike campaign until the end of this year. This followed a number of stronger-than-expected US economic data, indicating that further monetary tightening is still needed.
Powell signaled a majority of Fed officials expect it will need to raise interest rates at least two more times this year. He only restated the Fed’s official-making estimates published in mid-June, but his statement stressed the possibility of such an increase.
This hawkish gesture is based on the fact that the US labor market is still very tight, with an unemployment rate of 3.7 percent. Inflation is still two times higher than the Fed’s 2 percent target, although down from last year’s peak.
Earlier this month, after 10 consecutive rate hikes, the Fed chose to keep its benchmark interest rate in a range of 5 percent – 5.25 percent to assess the impact of previous rate hikes.
The Fed will hold four more policy meetings this year, with the next meeting on July 25-26, 2023 Data released after its speech on Thursday showed US jobless benefits claims unexpectedly fell last week.
Meanwhile, gross domestic product (GDP) grew much stronger in the first quarter of 2023 than previously estimated. US GDP recorded an increase of 2 percent compared to the previous quarter (quarter-to-quarter).
Powell Suggests Rate Hikes. Market participants are increasing expectations of a Fed rate hike in July and are currently pricing in a 40 percent chance of a further rate hike in November, up from around 30 percent prior to the data.