3 weeks ago
Tiny Inflation Shift Could Decide the Fed’s Next Move
The Federal Reserve decides whether to raise or hold interest rates.
It left rates unchanged at its meeting in July.
Three officials wanted rates to go higher.
Other officials may also support a hike if inflation does not get better.
Chairman Kevin Warsh recently said he was becoming more open to raising rates.
He said borrowing was not slowing the economy very much.
He also said recent summer inflation readings did not show a clear improvement in the larger trend.
A small change in upcoming inflation data could therefore influence the Fed’s next decision.
The Federal Reserve held interest rates steady at its July meeting.
Three officials dissented, favoring an interest-rate increase.
Other officials have said they could support a hike if inflation does not improve.
Chairman Kevin Warsh moved closer to the rate-hike camp in a speech last month.
Warsh said borrowing conditions were not clearly restraining the economy and recent data had not proven inflation was improving.
- Who
- The Federal Reserve, including Chairman Kevin Warsh and other Fed officials.
- What
- Officials are weighing whether to keep interest rates steady or raise them because of concerns about inflation.
- Where
- At the Federal Reserve and the Jackson Hole conference.
- When
- The Fed last met in July, and Warsh discussed the issue at the Jackson Hole conference last month.
- Why
- Officials are assessing whether inflation is improving and whether borrowing conditions are restraining economic activity.
Support Keeping Rates Steady
Support Raising Rates
Response to recent inflation readings
Support Keeping Rates Steady
The summer’s better inflation readings could support waiting before raising rates.
Support Raising Rates
Warsh said those readings did not demonstrate that the underlying inflation trend was improving.
Economic restraint
Support Keeping Rates Steady
Holding rates steady avoids adding further pressure while officials assess the economy.
Support Raising Rates
Warsh said borrowing conditions were not clearly restraining economic activity, suggesting a rate increase may still be needed.
Key facts
- Latest Fed decision
- Interest rates were held steady at the July meeting.
- Dissenting officials
- Three officials favored raising rates.
- Potential support for a hike
- Other officials said they could join the rate-hike camp if inflation does not improve.
- Chairman’s position
- Kevin Warsh moved closer to supporting a rate increase.
- Borrowing conditions
- Warsh said he saw little evidence that borrowing conditions were restraining the economy.
- Recent inflation data
- Warsh said the summer’s better readings had not convinced him that the underlying trend was improving.
Sources
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