Amid inflation rates, Federal Reserve prepared to jack up interest rates

Image Source: Andrew Harrer | Bloomberg | Getty Images

Federal Reserve Governor Christopher Wallace said on Monday that he is ready to take action and hike interest rates to battle the worsening inflation in the United States. He said further that the rates are going up throughout the year.

Waller said that hikes might exceed the “neutral” level that either supports the growth of the market or otherwise. “Over a longer period, we will learn more about how monetary policy is affecting demand and how supply constraints are evolving,” Waller said. “If the data suggest that inflation is stubbornly high, I am prepared to do more.”

The benchmark borrowing rates set by the Feds may range from 2.5% to 2.75%, but Waller said it is possible that this will increase further should inflation continue its upward trend.

The Federal Open Market Committee meeting in early May revealed that many officials think that “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”

The minutes also agree with the view of policymakers who see rates to increase by 50 basis points. This is inevitable, says the Feds, since it’s a necessary step if the country wants inflation rates to be curbed.

“In particular, I am not taking 50 basis-point hikes off the table until I see inflation coming down closer to our 2 percent target,” Waller said to the public.

 “And, by the end of this year, I support having the policy rate at a level above neutral so that it is reducing demand for products and labor, bringing it more in line with supply and thus helping rein in inflation.”

Inflation in the month of May accelerated; however, it was slower compared to other months. With this, the Feds plan on increasing rates while lowering demand. They said they would have to lower down labor demand while disallowing the unemployment rate to go up. In recent data by the Bureau of Labor Statistics, there are 5.6 million more job opportunities than there are American workers.

“Of course, the path of the economy depends on many factors, including how the Ukraine war and COVID-19 evolve. From this discussion, I am left optimistic that the strong labor market can handle higher rates without a significant increase in unemployment,” Waller concluded.


Opinions expressed by US Reporter contributors are their own.

Kate Ross

I’m a digital marketer and web developer. As a technical content writer, I’m ever curious about innovation, technology and industry.

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