The Federal Reserve’s potential for further interest-rate hikes has come under scrutiny as Washington grapples with political chaos. Despite the Fed maintaining its key short-term U.S. interest rate, it has hinted at a possible increase later this year should inflation slow down. Wall Street investors and many economists remain doubtful of another hike, with only a minority predicting a rise in November or December.
As the economy shows signs of cooling and inflation edges closer to the Fed’s 2% target, concern is growing over the rapid escalation of interest rates that has taken place over the past 18 months. This has had a significant effect on sectors such as housing, with mortgage rates approaching 8%.
Adding to the uncertainty is the potential government shutdown. Loretta Mester from Cleveland Fed noted this additional layer of unpredictability. The roles of Jerome Powell, the Chair of the Federal Reserve, and Speaker Kevin McCarthy also add complexity to an already uncertain situation.
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