With Debate Over What July’s Inflation Data Mean, One Fed Pres Sees Rate Increase in September

WASHINGTON–At least one Federal Reserve Bank president said he believes the Fed will again need to raise rates when it meets in September, despite new data showing the rate of inflation has slowed.

Neel Kashkari

Minneapolis Fed President Neel Kashkari said he anticipates the Federal Reserve will push up rates by another 1.5 percentage points this year and to around 4.4% next year.

“This is just the first hint that maybe inflation is starting to move in the right direction, but it doesn’t change my path,” said Kashkari during a panel discussion hosted by the Aspen Economic Strategy Group in Colorado.

The Wall Street Journal noted some Fed officials have suggested the central bank might lift rates by a half-percentage point in September, and “financial-market participants have run with the idea that the central bank would soon moderate its rate increases.”

But, as the Journal added, “that depends on a slowdown in economic activity, especially hiring. Two labor market reports since the Fed’s July 26-27 meeting offered no such signal.”

Officials with the Fed have said they want to see evidence that price pressures and economic growth are cooling before they moderate their pace of rate increases, the report noted.

As CUToday.info has reported, declines in prices of energy, airfares, and used cars last month offered the first sign of inflation relief since the spring after broad price gains in May and June alarmed central-bank officials.

We’ve Seen This Before

Fed Chairman Jerome Powell said in late July that another 0.75-point rate rise could be on the table at the September meeting but would “depend on the data we get between now and then.”

Powell noted in June that inflation diminished in the summer of 2021, “and then turned right around and went back up. So I think we’re going to be careful about declaring victory.”

As CUToday.info reported here, two credit union economists are forecasting the Fed will raise rates by at least 50 basis points during its September meeting.