In the face of persistent inflation, marked by a 0.3% rise in the core Consumer Price Index (CPI) and an overall CPI increase of 0.4%, the Federal Reserve is contemplating another interest-rate hike this year. This potential action comes as inflation surpasses the Fed’s 2% annual goal, as reported on Thursday.
The surge in long-term Treasury yields and potential market tightening could, however, prompt policymakers to defer another hike in their meeting slated for late October to early November. This insight was offered by Kathy Bostjancic, chief economist at Nationwide Mutual Insurance Co.
Prices for services, excluding housing and energy, have seen a significant increase which is causing concern among Fed officials like Chair Jerome Powell due to its link with a tight labor market.
Despite these concerns, central bankers are emphasizing patience and require more data before deciding on another hike. This perspective is supported by the views of economists like Jay Bryson of Wells Fargo & Co. and Derek Tang of LH Meyer/Monetary Policy Analytics, as per the minutes from their September meeting.
This cautious approach is taken even though 12 out of 19 officials have signaled they would support another rate increase this year. This follows a period where the benchmark lending rate has been raised by more than five percentage points over the last 19 months.
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