The head of the Fed allowed a further increase in the key rate

The U.S. Federal Reserve System (FRS) is likely to have to further raise its key interest rate to curb inflation, informed regulator chairman Jerome Powell.

According to him, the Fed’s “significant” tightening of monetary policy has led to a decrease in inflation, but it still remains well above the 2% target.

“We are open to further rate hikes if appropriate and intend to keep policy at a restrictive level until we are sure that inflation is steadily declining in the direction of our target,” Reuters quoted him as saying.

The Fed, Powell added, is alert to signs that the economy is cooling “not as expected” and “particularly high” consumer spending. All this could jeopardize further progress in lowering inflation, he said.

According to Reuters, the official’s speech at the Fed’s annual conference in Jackson Hole turned out to be much less disturbing this year compared to a speech in 2022, when Powell warned Americans of the coming “pain” caused by tightening PrEP. At the same time, there were no hints of policy easing and rate cuts in the foreseeable future either, the agency concludes.

July 26 US Federal Reserve raised key interest rate by 25 bp. p. – from 5-5.25% to 5.25-5.5% per annum. According to the regulator, the latest figures indicate that economic activity has grown at a moderate pace. Job growth has been robust in recent months, with unemployment low and inflation high.

At the meeting on June 14, the Fed kept the base rate at the level of 5-5.25% per annum. The next meeting on the key rate will take place on September 19-20.

Annual inflation in the US in July accelerated to 3.2%, the US Federal Bureau of Labor Statistics reported earlier. In June and May, annual inflation was estimated at 3% and 4%, respectively. Such dynamics is mainly due to the rise in housing prices (0.4% in monthly terms and 7.7% in annual terms).