Fed heads revise forecasts for rates to rise
2023.02.07 08:29
Fed heads revise forecasts for rates to rise
By Kristina Sobol
Budrigannews.com – According to Minneapolis Fed President Neel Kashkari’s statement on Tuesday, the Federal Reserve will probably need to raise interest rates to at least 5.4 percent in order to control high inflation, as January job gains demonstrate that policy actions have not significantly impacted the labor market.
In an interview with CNBC, Kashkari said, “I think it surprised all of us.” He was referring to the massive January jobs report from the U.S. government, which showed more than half a million new jobs. It informs me that there hasn’t been anything to lower my rate path as of yet because we haven’t seen much of an impact on the labor market so far.
One month ago, Kashkari predicted that the policy rate should pause at 5.4%, making him one of the Fed’s most aggressive policymakers when it comes to determining how high interest rates should go.
Later on Tuesday, at 12:40 EST (or 17:40 GMT), Fed Chair Jerome Powell is scheduled to speak.
The benchmark overnight lending rate in the United States went up by a quarter of a percentage point last week, from 4.5 percent to 4.75%. Powell reaffirmed expectations that the Fed would consider a pause in the range of 5.25 percent to 5.25 percent to be restrictive enough to combat high inflation.
However, the U.S. economy added far more jobs than anticipated and the unemployment rate fell to 3.4%, the lowest level since 1969, shattered investor expectations in the January jobs report.
Raphael Bostic, president of the Atlanta Fed, stated on Monday that despite the fact that a half-percentage-point rate hike was not his base case, the central bank may need to raise borrowing costs more than anticipated in light of the unexpectedly strong job gains.
