The Fed: Fed may have to raise interest rates once more this year, Mester says

by | Oct 2, 2023 | Stock Market

The president of the Cleveland Federal Reserve said Monday she suspects the central bank “may well need to raise” interest rates once more this year and then keep rates high “for some time” to get inflation fully under control. Loretta Mester, in a speech in Cleveland, said “inflation remains too high” despite a sharp slowdown in price increases since last year.

What’s more, rising oil prices threaten to stall further progress in lowering inflation, she said. Since households have to fill up their cars or trucks once or twice a week, she said, “rising gasoline prices could begin to make consumers think inflation will be rising again. “If so, higher inflation could become embedded in people’s view of the economy and affect their behavior in ways inconsistent with price stability.” The Fed in late September decided not to raise interest rates again, but it left the door ajar for one more increase this year if inflation doesn’t continue to slow. Senior officials are more divided than they were earlier in the year, however. Twelve of the Fed’s governors and regional bank presidents predict one more rate hike in 2023, but seven see no need for further action. Mester has favored a somewhat more aggressive approach, along wit …

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