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Jerome Powell, the president of the US Federal Reserve, warned that the ceiling that interest rates in the country can reach will be higher than expected, in view of current economic data.
According to Jerome Powell, president of the Federal Reserve (Fed), “the data received since our last meeting suggests that the final level of interest rates will be higher than previously expected.” In addition, he acknowledged that inflation is still at levels higher than expected.
The Fed announced a 0.75 percentage point increase in the official interest rate, the sixth increase since March and the fourth consecutive increase of three quarters of a point. In this way, the Fed opened the door to the possibility that the next rate hikes will be less than 75 basis points.
“The time (for smaller hikes) is coming and it may come as soon as the next meeting,” which is in December, “or the next, but no decision has been made yet,” Powell said.
Powell acknowledged that there is still no scientific method to determine at what point inflation will contract, but explained that in the event that interest rates are raised too much, the Fed could always stimulate the economy again.
“If you make the mistake in the other direction, and you let this drag on, … the risk is that it becomes ingrained in people’s minds,” and the job damage could be much greater, he explained.
The official also acknowledged that the possibility of curbing inflation without causing a recession in the world’s leading economy “has been reduced”, although it continues to exist. “I think as soon as rates have to go up and they have to stay up longer it becomes harder to see that path, it’s narrowed,” he said.
Now, the official interest rate is in the range of between 3.75 and 4%, the highest level since 2017.
The latest data from the Bureau of Labor Statistics shows that the year-on-year inflation rate fell for the third consecutive time in September and stood at 8.2%, although consumer prices rose four tenths monthly.
with EFE
