US Fed Suggests Further Interest Rate Hikes

Facts

• On Friday, US Federal Reserve (Fed) Chair Jerome Powell suggested that further interest rate hikes may be needed as the economy continues to stay hot and inflation remains above target.¹
• Delivering a highly anticipated speech at the Kansas City Fed’s annual conference in Jackson Hole, Wyo., Powell doubled down on the Fed’s policy of increasing interest rates in hopes of getting inflation back down to its goal of 2%.²
• While Powell’s overall message was similar to last year's, he hinted that the Fed would take a more nuanced and careful approach as it looks to increase rates.³
• Despite hiking rates to a 22-year high in July, the economy hasn’t slowed as much as Powell anticipated. He also noted that the Fed wants “below-trend growth” in order to bring down prices.⁴
• The Fed has hiked rates 11 times, with the benchmark interest rate going from near zero to more than 5% since last spring. The increased rates have had an effect on homebuyers as the average 30-year fixed-rate mortgage rose above 7%.⁵
• Despite the concerns, inflation sits at 3.2%, down from its 9.1% peak in June 2022. Unemployment also remains low at 3.5%, and the Fed is expected to announce updated rates when officials meet in September.⁶

Sources: ¹Reuters, ²NBC, ³Associated Press, ⁴CNN, ⁵FOX News, and ⁶CBS.

Narratives

• Establishment-critical narrative, as provided by Washington Examiner. Jerome Powell has utterly failed as chairman of the Fed and needs to resign. Under his watch, inflation reached record highs, and despite hiking interest rates to 22-year highs, the high inflation persists. Meanwhile, the US is seeing the biggest bank collapses since the last financial crisis, while the Fed completely lacks oversight. Powell is in over his head and must step down.
• Pro-establishment narrative, as provided by Washington Post. Jerome Powell has done a masterful job as the Fed looks to bring down inflation while providing a soft landing for the economy. The pandemic — and many other unforeseen circumstances — threw wrenches into the financial system, affecting economies across the globe. Not only has he brought inflation down to 3.2%, but Powell has also allowed the economy to continue working for Americans.