{"id":1281,"date":"2023-10-15T04:12:23","date_gmt":"2023-10-15T04:12:23","guid":{"rendered":"https:\/\/connectwithfund.com\/economy\/fed-may-have-to-raise-interest-rates-once-more-this-year-mester-says\/"},"modified":"2023-10-15T04:12:24","modified_gmt":"2023-10-15T04:12:24","slug":"fed-may-have-to-raise-interest-rates-once-more-this-year-mester-says","status":"publish","type":"post","link":"https:\/\/connectwithfund.com\/?p=1281","title":{"rendered":"Fed may have to raise interest rates once more this year, Mester says"},"content":{"rendered":"
\n

The president of the Cleveland Federal Reserve said Monday she suspects the central bank \u201cmay well need to raise\u201d interest rates once more this year and then keep rates high \u201cfor some time\u201d to get inflation fully under control.<\/p>\n

Loretta Mester, in a speech in Cleveland, said \u201cinflation remains too high\u201d despite a sharp slowdown in price increases since last year.<\/p>\n

\n

What\u2019s more, rising oil prices threaten to stall further progress in lowering inflation, she said.<\/p>\n

Since households have to fill up their cars or trucks once or twice a week, she said, \u201crising gasoline prices could begin to make consumers think inflation will be rising again.<\/p>\n

\u201cIf so, higher inflation could become embedded in people\u2019s view of the economy and affect their behavior in ways inconsistent with price stability.\u201d<\/p>\n

The Fed in late September decided not to raise interest rates again, but it left the door ajar for one more increase this year if inflation doesn\u2019t continue to slow.<\/p>\n

Senior officials are more divided than they were earlier in the year, however.<\/p>\n

Twelve of the Fed\u2019s governors and regional bank presidents predict one more rate hike in 2023, but seven see no need for further action.<\/p>\n

Mester has favored a somewhat more aggressive approach, along with several others including Fed Gov. Michelle Bowman. She is not a voting member this year of the Fed committee that sets interest rates, though.<\/p>\n

The central bank has raised U.S. interest rates steadily over the past year and a half to try to douse the raging fires of inflation. It\u2019s lifted a key short-term interest rate to a top range of 5.5% from near zero in March 2022.<\/p>\n

The strategy has helped to slow inflation to an annual rate of under 4% from a 40-year high of 9.1% in the summer of 2022.<\/p>\n

The Fed\u2019s goal is to reduce the rate of inflation to 2%, similar to the typical annual increase before the pandemic.<\/p>\n

To get there, the Fed might have to keep rates high for a prolonged period of the time \u2014 the so-called \u201chigher for longer\u201d approach. Mester supported that approach.<\/p>\n

\u201cBut whether the fed funds rate needs to go higher than its current level and for how long policy needs to remain restrictive will depend on how the economy evolves relative to the outlook,\u201d she said. \u201cThere is considerable uncertainty around the outlook.\u201d<\/p>\n

Borrowing costs could remain high well into 2024, bad news for home buyers, growing businesses and others who need to borrow. <\/p>\n

Higher interest rates help to tame inflation by reducing consumer spending and business investment, but at the cost of economic growth.<\/p>\n

The Fed is trying to avoid raising rates so high that a recession follows, but that\u2019s been the usual outcome since World War II every time the central bank has begun a rate-rising cycle.<\/p>\n

That\u2019s why the Fed is wrestling with how long to keep rates high.<\/p>\n

\u201cThe most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals,\u201d Fed Gov. Michael Barr said in a Monday speech in New York. <\/p>\n

Most Wall Street
\n DJIA
\n forecasters don\u2019t expect the Fed to start to cut rates until the waning months of 2024. The Fed itself has penciled in just two rate reductions next year.<\/p>\n

\u201cTightening too much would slow the economy more than necessary and entail higher costs than needed to get inflation back to our goal.\u00a0 Tightening too little would allow high inflation to persist,\u201d Mester said.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The president of the Cleveland Federal Reserve said Monday she suspects the central bank \u201cmay well need to raise\u201d interest rates once more this year and then keep rates high \u201cfor some time\u201d to get inflation fully under control. Loretta Mester, in a speech in Cleveland, said \u201cinflation remains too high\u201d despite a sharp slowdown in price increases since last year. What\u2019s more, rising oil prices threaten to stall further progress in lowering inflation, she said. Since households have to fill up their cars or trucks once or twice a week, she said, \u201crising gasoline prices could begin to make<\/p>\n","protected":false},"author":1,"featured_media":1282,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38],"tags":[],"class_list":["post-1281","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy"],"yoast_head":"\nFed may have to raise interest rates once more this year, Mester says | ConnectWithFund<\/title>\n<meta name=\"description\" content=\"The president of the Cleveland Federal Reserve said Monday she suspects the central bank \u201cmay well need to raise\u201d interest rates once more this year and\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/connectwithfund.com\/?p=1281\" \/>\n<meta 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