Even though India has started getting relief on the inflation front, the challenges facing America, the world’s largest economy, have not diminished. The US Central Bank Federal Reserve believes that inflation remains very high. In such a situation, the Federal Reserve thinks there may be a need to increase interest rates further.
Due To This, There Is A Possibility Of Increase In Interest
US Central Bank Chairman Jerome Powell was addressing a conference in New York on Thursday. He clearly said in his address that inflation in America is still very high, and there is still scope for increasing interest rates to control it. He said that if there is a decline in new jobs or wage growth slows down, the Federal Reserve may have to consider the current strategy of keeping interest rates stable.
Interest Is The Most Expensive In 22 Years
Talking about America, the Federal Reserve aggressively increased interest rates after inflation got out of control. Currently, interest rates in America have reached a 22-year high. The highest interest rates in decades are having an impact on the growth of the economy. Expensive interest rates have also increased the risk that the world’s largest economy may fall into recession. After that, the Federal Reserve adopted a strategy of keeping interest rates stable.
Inflation Far From Long-Term Goal
The Federal Reserve has set a target of bringing retail inflation within the range of 2 per cent. Currently, the inflation rate in America is around 4 per cent. Last year, the inflation rate reached its highest level in more than 4 decades. In June 2022, the US inflation rate was 9.1 per cent, the highest in 42 years. This has brought inflation down from record levels but is almost double the long-term goal of 2 per cent.
Still Waiting For More Data
This is why the Federal Reserve Chairman is clear about the future strategy. He believes the strategy cannot be changed based on positive data of a few months. Meaning there is no scope for reducing interest rates at present. Powell said that we would have to wait for more data; only then can it be said confidently that inflation has come under control. Therefore, the Federal Reserve will remain cautious regarding interest rates.
