In addition to preparing the ground for future interest rate increases in the months ahead, the Federal Reserve revealed on Wednesday that officials are still not sure if this year will require any rate cuts. This dashes hopes that the central bank will change its “hawkish” stance, which has scared investors, sunk the housing market, and brought on signs of an upcoming recession.
In order to help slow inflation, Fed officials believed it would be “appropriate” to raise interest rates once more in the upcoming months at their most recent meeting in December, according to a summary released on Wednesday. Contrary to what some people expected the central bank to do, they did not believe that lowering rates this year would be “appropriate.”
Officials “welcomed” the slower inflation rate in October and November, but they said they needed “substantially more evidence of progress” to be sure inflation is on a “sustained” path down. Minneapolis Fed President Neal Kashkari complained about inflation, which reached a 41-year high of 9.1% in June, in a Wednesday blog post. Despite mounting evidence, he said, “It is too soon to say for sure that inflation has peaked.”
Kashkari, who will vote on the Fed’s interest rate decisions this year, warned it would be a “costly error” to prematurely cut rates again, citing the 1970s’ prolonged inflation. The Dow Jones industrial average lost nearly 300 points after the Fed’s meeting.
To combat inflation, which is still close to four times the Federal Reserve’s historical 2% target, the central bank has been increasing interest rates. Bond investors expect the top rate to be 4.94 percent, but economists at Goldman Sachs say that the Fed will raise rates by a quarter point at each of its next three meetings.
