Fed Likely to Signal Half-Point Rate Rises Through September After Inflation Report
The Fed has already indicated it will raise rates by a half point at its meeting next week.
Photo:
saul loeb/Agence France-Presse/Getty Images
Another high inflation report is likely to lead more Federal Reserve officials to anticipate a fourth consecutive half-percentage-point rate rise will be warranted at their meeting this September.
The Fed has already indicated it will raise rates by a half point at its meeting next week and that it is very likely to do so again in July. Officials have said that they would continue to raise rates at that pace if inflation doesn’t show signs of a convincing slowdown.
The Labor Department reported Friday that the consumer-price index rose 8.6% in May from the same month a year ago, pushing inflation to a new 40-year high. Rising fuel prices and supply-chain disruptions from Russia’s war against Ukraine have sent prices up in recent months.
The Fed raised rates last month by a half percentage point for the first time since 2000, bringing its benchmark short-term interest rate to a range between 0.75% and 1%.
Fed Chairman
Jerome Powell
said the central bank could continue to raise rates at that pace until it sees conclusive evidence that inflation is easing, and Friday’s report offered the opposite.
“Truthfully, this is not a time for tremendously nuanced readings of inflation. We need to see inflation coming down in a convincing way…and until we see that, we’re going to keep going,” Mr. Powell said in an interview last month. “We’re not going to assume that we’ve made it until we see that, and we’re not seeing that right now.”
A few Fed officials had suggested that after some glimmers of inflation deceleration in recent months that the central bank might be able to slow the rate rises to a more traditional quarter-point increment in September.
But several others, including Vice Chairwoman
Lael Brainard,
Fed governor
Christopher Waller
and Cleveland Fed President
Loretta Mester,
have indicated that they could easily lean toward supporting half-point increases into the fall.
“If we don’t see the kind of deceleration in monthly inflation prints…then it might well be appropriate to have another meeting where we proceed at the same [half-percentage-point] pace,” Ms. Brainard said on CNBC last week.
Write to Nick Timiraos at nick.timiraos@wsj.com
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