The central bank must decide how long to keep interest rates high to make sure inflation is tamed.
Federal Reserve Gov. Michael Barr says the biggest challenge for the central bank is to decide how long to keep interest rates high to make sure inflation is tamed.
The Fed two weeks ago left its benchmark short-term interest rate unchanged at a range of 5.25% to 5.5%. But it also left open the door for another rate hike before year-end if inflation doesn’t slow further toward the Fed’s 2% target. Barr also said the full effects of higher borrowing costs are still working their way through the economy and are likely to push inflation lower.
“I now see a higher probability than I did previously of the U.S. economy achieving a return to price stability without the degree of job losses that have typically accompanied significant monetary policy tightening cycles,” he said. “However, theThe Fed’s next step is still unclear. At their meeting in late September, 12 of the Fed’s 19 governors and regional bank presidents predicted one more hike. Seven expect rates to stay at the current level.
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