Federal Reserve officials are considering a second consecutive interest rate hike slowdown in the next meeting as economic data points to a decline in inflation. As a result of cooling inflation, the central bank may decide that it can afford to loosen its monetary policy while keeping prices under control.
With a wave of economic data indicating a slowdown in inflation, a tight U.S. labor market and low unemployment figures have prevented the Federal Reserve from abandoning its persistently tight interest rate policy. Currently, unemployment remains at a five-decade low.
Despite receiving mixed signals, investors doubt the Federal Reserve’s claims that it may have to resort to raising interest rates from 4.5% to above 5%.
“Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2% on a sustained basis,” Fed Vice Chair Lael Brainard commented on Thursday.
Lorie Logan and Patrick Harker, presidents of the Dallas and Philadelphia Fed banks agreed with Brainard’s sentiment, explaining that a few more interest rate rises are expected this year. They did admit, however, that they expect such rises to be less extreme than before.