The Federal Reserve faces a tough decision on whether to raise interest rates again this year as some officials worry about inflation while others fear a slowdown in the economy, according to the Wall Street Journal.
The FED has raised interest rates to the range of 5.25% to 5.5%, the highest level in 22 years, in 11 of its last 12 meetings, the last of which was in July. However, he may pause the rate hike in September and discuss whether he will raise interest rates in November or December.
A group of officials is worried about inflation and wants a policy of guarantees against it by increasing interest rates again this autumn. They argue that reversing course later could be more devastating if inflation turns out to be higher than expected.
The CME FedWatch tool currently gives a 93% probability of a rate hike pause.
The other group is more supportive of suspending interest rate increases and wants interest rates to be kept at current levels. They point to signs of slowing growth in China and Europe, as well as the lagging impact of past interest rate increases on the US economy. They also view risks more conservatively and worry about triggering a downturn or a new period of financial turmoil by raising interest rates too much.
According to some economists, the difference between a rate hike and no rate hike may not be that big. But others warn that the Fed could make a policy mistake by relying too heavily on backward-looking data and ignoring forward-looking indicators that suggest the economy may not be able to handle higher interest rates.
The next FOMC meeting will be held September 19-20, 2023.
*This is not investment advice.
