Anjali Sharma
GG News Bureau
WASHINTON, 3rd Feb. US Federal Reserve on Wednesday approved a quarter-point interest rate hike indicated progress in the battle with inflation.
The decision came after months of increasing the rate with the intention to cool the economy and marks the return to a more traditional interest-rate policy.
Fed is targeting the hikes to bring down inflation, despite recent signs of slowing, which is running near its highest level since the early 1980s.
Fed Chair Jerome Powell signalled that while there’s still a long way to go in the fight against inflation, he believes the trend is moving in the right direction.
Powell warned economy watchers that “the job is not fully done” and that the labor market remains too tight for his liking. it would be “very premature” to think “we really got this,” he said, adding that unless the economic trajectory changes drastically.”
He doesn’t expect to cut rates this year.
Michelle Bowman, federal reserve’s member of the Board of Governors, said the institution will continue tightening monetary policy by raising key interest rates even though there has been a decline in consumer inflation.
“In recent months, we’ve seen a decline in some measures of inflation but we have a lot more work to do, so I expect the FOMC will continue raising interest rates to tighten monetary policy, as we stated after our December meeting,” Bowman said at the Florida Bankers Association Leadership Luncheon Events in Miami.
“My views on the appropriate size of future rate increases and on the ultimate level of the federal funds rate will continue to be guided by the incoming data and its implications for the outlook for inflation and economic activity,” he said.
US Federal Reserve in its latest monetary policy meeting raised interest rates by 50 basis points.
Its policy rate is in a target range of 4.25-4.50 per cent, the highest level in 15 years, and notably, it was near zero in the early part of 2022.
Fed stressed that raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
Bowman said she will look for signs that inflation has peaked and consistent indications that it is on a downward path before determining the appropriate size of future rate hikes.
According to the Fed, in December, consumer inflation in the US moderated to 6.5 per cent from 7.1 per cent the previous month but still is way above the 2 per cent target.
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