Fed may raise interest rates twice in a row

Some Fed officials favor raising interest rates at meetings this month and in September, to further strengthen the fight against inflation.

Federal Reserve Chairman Jerome Powell has repeatedly said the agency has a lot of work to do, and he has not ruled out further interest rate hikes. Last weekend, Fed Board of Governors member Christopher Waller also reaffirmed his view that two more interest rate hikes are needed this year.

"Since the June meeting, we've had another month of data to assess the situation. And I'm increasingly confident that the banking turmoil is not having a significant impact on the economy . I see no reason why the first rate hike shouldn't happen this month," Waller said at a forum at New York University.

He also said that if inflation does not pick up and economic activity does not slow significantly, a second rate hike is likely soon. In other words, if inflation remains high, the labor market remains strong relative to average, and the economy contracts only slightly, the Fed is likely to raise rates in September.

Fed interest rate adjustments since 2006. Chart: Reuters

Investors are betting the Fed will raise interest rates this month, after pausing last month. The agency has raised interest rates 10 times in a row since March last year, taking the benchmark rate to a range of 5-5.25%. That is the highest level in more than 15 years.

So far, most Fed officials have signaled that they are leaning toward a July rate hike. However, the decision in September will be more difficult, as the Fed will have to decide whether to hold off or wait for more signs of inflation. All officials have made it clear that they want inflation to cool as soon as possible.

Concerns about banks have largely eased, with credit not tightening significantly after three bank failures earlier this year. Some leading banks even reported a jump in second-quarter profits.

This gives Fed officials more confidence in the current tightening cycle, increasing the likelihood of a September rate hike. But of course, this still depends on other economic data, which will be released in the coming months.

Core inflation, which strips out volatile prices, did not slow as much as headline inflation in June. The labor market also remained strong, adding 209,000 jobs last month. The Fed’s next meeting is July 25-26.

Ha Thu (according to CNN)

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