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Will The Fed Raise Rates Again? Powell Remains Fixated On 2% Inflation Target

Summary:
The likelihood of another Federal Reserve policy rate hike grew stronger on Friday after Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium. During the speech, Powell reiterated that the Federal Reserve remains committed to bringing inflation down to 2%, despite some economists suggesting that achieving that target may be difficult. “Two percent is and will remain our inflation target,” said Powell. Getting there, he added, will require a “period of below-trend economic growth.” So far, the Fed isn’t getting the results it needs, as the economy “may not be cooling as expected,” he continued. Earlier this week, popular economist Paul Krugman wrote a piece for the New York Times, arguing that the Fed may want to target 3% inflation instead, arguing that 2%

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The likelihood of another Federal Reserve policy rate hike grew stronger on Friday after Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium.

  • During the speech, Powell reiterated that the Federal Reserve remains committed to bringing inflation down to 2%, despite some economists suggesting that achieving that target may be difficult.
  • “Two percent is and will remain our inflation target,” said Powell. Getting there, he added, will require a “period of below-trend economic growth.”

  • So far, the Fed isn’t getting the results it needs, as the economy “may not be cooling as expected,” he continued.
  • Earlier this week, popular economist Paul Krugman wrote a piece for the New York Times, arguing that the Fed may want to target 3% inflation instead, arguing that 2% is “probably bad economics.”
  • After the speech, the odds of a rate hike at the Fed’s next meeting in September rose to 19%, according to the CME FedWatch tool. Meanwhile, the odds of another hike this year rose to 52.1% – a two-month high.
  • Rate cuts, which many expect will trigger more investment into crypto and stocks, are not expected until June 2024.

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