The Federal Reserve continues to explore further interest rate hikes to combat the persistent inflation issue and bring it back to its desired 2% target. Boston Fed President, Susan Collins, suggested that further monetary tightening isn't off the table. Meanwhile, Governor Michelle Bowman, addressing the Independent Community Bankers of Colorado, positioned herself as one of the more hawkish members of the Federal Open Market Committee, hinting at the necessity of multiple rate hikes to achieve the inflation target.
The FOMC recently maintained its target range for the federal funds rate between 5.25% and 5.5%, a two-decade peak. However, the latest projections indicate a tilt towards another rate hike in 2023 by 12 of the 19 officials, emphasizing the urgency to decelerate inflation. Additionally, some predictions anticipate the rates reaching above 6% in 2023, with fewer reductions expected in 2024. This shift is attributed in part to a strengthening labor market.
Bowman expressed concerns about potential energy price hikes reversing the recent progress on inflation. The Fed's preferred inflation metric, the personal consumption expenditures price index, recorded a modest rise of 0.2% in July, showcasing the headway the Fed has made in stabilizing prices. Despite the tightening of monetary policies, Bowman observed that these measures seem to have less impact on lending than anticipated.
San Francisco Fed President, Mary Daly, echoed a cautionary tone, emphasizing the bank's unwavering commitment to addressing price pressures methodically. While she refrained from offering a direct perspective on future rate hikes, she mentioned the need for more time to gather essential information before making decisions.
