Fed expects to raise interest rates as inflation continues

17/08/2023 Argaam
Federal Reserve

Federal Reserve


Members of the Federal Reserve unanimously agreed at their meeting in July to raise interest rates to the highest level in 22 years, with the persistence of inflation risks.

 

According to the US central bank's meeting minutes released today, Aug. 17, policymakers decided to increase interest rates by 25 basis points to the 5.25-5.50% range, during their meeting on July 25-26.

 

Minutes also showed that Fed policymakers do not foresee any recession in 2023, in contrast to expectations of weak economic growth in the coming two years.

 

Discussions indicated that most of the Fed members are concerned that the inflation battle is not over yet and may require additional tightening measures from the rate-setting committee.

 

Minutes confirmed that the Federal Open Market Committee (FOMC) will continue to cut its holdings of Treasury bonds and mortgage-backed securities, being “firmly” committed to bringing inflation to the Fed’s 2% target.

 

This is in contrast to the minutes of the last meeting, which reflected that as part of the attempts to tighten monetary policy to reduce inflation to the 4% target, average expectations of policymakers suggested the need for two additional interest rates hikes.

 

As for future decisions, the US central bank affirmed an approach that relies on evaluating data on labor market conditions, inflation pressures and expectations, and financial and international developments, with the FOMC ready to adjust monetary policy appropriately if risks arise and impeded achieving the committee's inflation goals.

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