Federal official suggests possible rate hike

The President of the Federal Reserve Bank of New York, John Williams, confirmed that raising interest rates again may be necessary this year to help inflation return to its 2% target. He clarified that the expected inflation rate of 3.5% this year will decrease to below 3% by 2027, with forecasted inflation reaching the target in 2028. Williams pointed out that the decision to raise rates in September provides policymakers with time to assess economic data, and he mentioned that another possible rate increase could occur later this year. Market expectations for a rate hike in October have decreased from 70% to 50%. He emphasized that the U.S. economy remains strong, but inflation risks are increasing due to demand influenced by artificial intelligence, energy prices, and tensions in the Middle East. He also noted that monetary policy can only address supply shocks without affecting production rates or opening new pipelines. Additionally, Williams stated that the Federal Reserve will continue tightening monetary policy if supply shocks persist, as inflation risks have risen compared to previous forecasts.

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