The US Federal Reserve is stepping up its fight against inflation. The regulator has left the door open for one more interest rate hike by skipping an increase at the September meeting. Thus, policy tightening remains on the Fed's agenda.
"Broadly, stronger economic activity means we have to do more with rates," Fed Chairman Jerome Powell stated, signaling the need for one or more rate hikes this year, which would not hurt the economy. In September, the US central bank announced a pause in its tightening cycle, leaving the rate unchanged in the 5.25%-5.50% range. In all, the Fed has raised its key federal funds rate 11 times since March 2022. Before that, the rate was held at 0.25% for two years.
The decision to hold rates steady does not mean that the Fed has already achieved its monetary policy goals, Powell pointed out.
Like the Fed, most major central banks find it expedient to keep lifting interest rates. According to the head of the US regulator, one more hike is needed to "see convincing evidence really that we have reached the appropriate level." The Fed is "close enough" to "a place where we're confident that we have a stance that will bring inflation down to 2 percent over time," Powell said, adding that future rate decisions will depend on "ongoing assessments of the incoming data and the evolving outlook and risks" and "the fact that we've come this far lets us really proceed carefully." Responding to a question about a possible policy shift, he did not rule out rate cuts in the future but stressed "a lot of uncertainty."