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| FED Chairman Jerome Powell left open the possibility of raising interest rates at the September meeting. (Source: Reuters) |
On August 25, speaking at the annual conference of world bank leaders in Jackson Hole (USA), Chairman of the US Federal Reserve (FED) Jerome Powell said the Fed is prepared to raise interest rates if necessary and intends to maintain high interest rates.
However, he also called for caution in assessing the data as well as the outlook and risks. According to this official, the Fed needs price stability to ensure strong labor market conditions.
After 11 rate hikes in less than 18 months, US interest rates are now at 5.25-5.5%, the highest level in 22 years. However, the rapid rate hikes have not yet brought inflation back to the Fed's 2% target.
Since the beginning of the year, US GDP growth has exceeded forecasts and long-term trends, while recent data have shown strong consumer spending. Specifically, the Personal Consumption Expenditures (PCE) Price Index, which the Fed prioritizes monitoring, increased slightly in July. The Fed estimates that the PCE index increased 3.3% in July compared to the same period last year, after increasing 3% in June.
Before Mr. Powell's speech, analysts and policymakers were still divided on the possibility of the Fed raising interest rates for a 12th time at its September meeting. Unexpectedly strong growth and employment figures in recent months showed that the US economy was in better shape than economists had predicted at the beginning of the year.
In the second quarter of 2023, the US economy grew by 2.4%. However, the consumer price index (CPI) increased by 3.2% in July, and the core CPI increased by 4.7%, both exceeding the target.
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