The Fed will continue to raise rates, but not as aggressively

The Fed is likely to raise interest rates in the coming months. But it will do it at a slower pace than before, said the head of the department, Jerome Powell, writes The Wall Street Journal.

On June 14, for the first time since March 2022, the Central Bank kept the range of the key rate at the level of 5-5.25% per annum.

“Given how far we have come, it may make sense to increase the parameter, but at a more moderate pace,” — Powell said.

Chapter Fed compared the latest solutions to a driver who, after leaving the highway, drives at a lower speed in order not to miss the final destination.

The publication pointed out that inflation and economic activity this year slowed down not as much as many officials expected. This added to the uncertainty about how much the Fed could tighten monetary policy.

Officials see a risk that past rate hikes, coupled with recent stresses in the banking sector, will lead to a sharper-than-expected slowdown in GDP growth, the WSJ added. They are trying to balance this with the risk that the economy will be stronger than expected and inflation will remain too high, requiring further tightening.

The Fed’s rate forecast allows for two more hikes this year. Powell called it “good, provided the economy performs as expected.”

“The committee will make decisions meeting after meeting, based on the totality of incoming data,” — Powell explained.

According to the futures market, the probability of a key rate hike in July is 71.9%. A month ago, the market estimated it at 32.9%.

The Fed’s position was affected by the collapse of Silicon Valley Bank, which led to doubts about the stability of a number of regional banks. In the minutes of the March meeting, some members of the committee expressed doubts about the advisability of further tightening the policy. Bank failures could make things harder for the Fed, the WSJ concluded.

Recall, Nansen analysts noted that the resumption of the Bitcoin bull market requires regulatory clarity in the United States and a steady decline in core inflation.

Earlier, CoinShares analysts pointed to the caution of investors in the cryptocurrency market due to the lack of certainty in the issue of completing the cycle of tightening the Fed’s monetary policy.

Found a mistake in the text? Select it and press CTRL+ENTER