The Fed Remains Open to Interest Rate Hikes
Several Federal Reserve officials at the latest policy meeting assessed that there are still reasons to raise interest rates. However, they ultimately supported the decision to hold the benchmark interest rate.
The minutes of the FOMC meeting on June 16-17 showed that Fed officials' concerns about inflation were beginning to increase. Meanwhile, concerns about the labor market eased slightly as employment conditions were deemed not to have weakened too significantly.
At that meeting, the FOMC unanimously agreed to maintain the benchmark interest rate in the 3.50%–3.75% range. This was the first meeting under the leadership of Fed Chairman Kevin Warsh. In its statement, the Fed emphasized that inflation remains high and the central bank remains committed to restoring price stability.
The latest projections show that Fed officials' views remain divided. Nine officials predict at least one rate hike this year, with six seeing the possibility of two hikes. The remaining nine officials predict no change in the interest rate or even the possibility of a cut.
The minutes also showed that the Fed's policy direction is highly dependent on inflation developments. If inflation continues to decline, most officials believe interest rates could be maintained or even eventually lowered. However, if inflation remains high due to strong AI demand, high energy prices, and tariffs, additional tightening may still be necessary.
Inflation concerns became more relevant after the PCE price index rose 4.1% year-on-year in May, the highest level since April 2023. Core PCE also rose 3.4%, indicating price pressures were not solely coming from energy. Now, the market will await June consumer inflation data on July 14 and Kevin Warsh's first testimony to Congress to determine the Fed's next policy direction. (arl)*
Source: Newsmaker.id
