A slowdown in the consumer price index in July is an early sign that inflation is starting to move in the right direction, but the Federal Reserve is still a long way from marking its victory over inflation, the Fed’s chairman said on Wednesday of the Federal Reserve Bank of Minneapolis, Neel Kashkari;
While the reduction in inflationary pressures on prices shown by government data released earlier on Wednesday is “welcome”, Kashkari added that the Fed is “very, very far from declaring victory” and must raise interest rates much higher than the current range of 2.25%-2.50%.
He stressed that he continues to believe the Fed should raise interest rates to 3.9% by the end of this year and to 4.4% by the end of 2023 in order to combat inflation.
As for expectations for a possible change of course from the Fed, he stressed that it is “not realistic” for the market to expect interest rate cuts early next year. He explained that the Fed will not do so “until we are convinced that inflation is on track” toward the Federal Reserve’s 2% target.
Source: Capital
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