The Fed seems unwilling to end interest rate hikes

Federal Reserve Chairman Jerome Powell is likely to argue on Wednesday that the US central bank’s priority is to combat rising prices with another interest rate hike, despite cooling inflation and cooling sectors the economy appear to be weakening.

Financial markets expect the Fed to stop raising interest rates soon and possibly stop at some point this year, while analysts say Powell needs to overcome that optimism.

If financial markets expect lower rates than the Fed plans, the bank’s job can always be made more difficult.

Powell’s address will come after the 19-member Fed’s monetary policy committee conference. The panel is expected to raise the interest rate by a quarter point to 4.75%, its highest level in 15 years.

The decision will further increase the cost of borrowing for consumers and businesses, from mortgages, to vehicles, to business loans.

Inflation has weakened since the fall and economists fear that if the Fed continues to raise interest rates the economy could slide into a painful recession, with many job losses.

However, central bank officials say they need to see more evidence of inflation falling to close to the 2% target before considering suspending interest increases.

Still, Powell is not expected to signal a pause in rate hikes any time soon, because that would unleash strong gains in the stock and bond markets, pushing the economy (and inflation) higher. put more money in the pockets of consumers and would stimulate business lending.

Precisely the opposite of what the Fed wants.

[Con información de The Associated Press]

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