Fed seeks to battle inflation by maintaining higher interest rates for longer

Fed officials seem to agree to keep monetary policy tight for longer, with the goal of bringing inflation to the 2% target.

On Monday, Fed Governor Michelle Bowman said she was prepared to support further interest rate increases at the next meeting if upcoming inflation data show stagnation or the pullback is too slow.

Although he recognized the improvement, he said that «inflation remains too high and I expect that it is probably appropriate for (the Fed) to raise rates further and keep them at a restrictive level for some time.»

From almost 9% last year to 3.7% in its most recent 2023 reading, US inflation has decreased. The cycle of rising interest rates is largely to blame for some of the slowdown.

John Williams, president of the New York central bank, and Fed Chairman Jerome Powell concurred that a stringent monetary policy must be maintained for a while.

Only a small majority of the Fed’s estimates, which were made public in September, predicted that the rate would end 2024 over 5%; some predicted a higher fall. The Fed now predicts fewer cuts than it did in June.

Additionally, central bank decision-makers anticipate stronger labor market conditions and faster economic expansion.