3 Reasons Why the Fed Will Have to Be Even More Hawkish in 2024
The Federal Reserve held its benchmark interest rate unchanged in a widely expected decision on Wednesday and struck a hawkish tone as the central bank’s ongoing battle against inflation appears to be far from over.
FOMC officials said they still see one more 25 basis point rate hike before the end of this year, with the Fed funds target rate peaking in the 5.50%-5.75% range.
The U.S. central bank also warned of much tighter monetary policy through 2024 than previously expected.
«We are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,» Fed Chair Jerome Powell said in a press conference after the release of the statement and projections.
«We're prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we're confident that inflation is moving down sustainably toward our objective,» Powell stated.
Yet suddenly, some inflation alarms are ringing again amid a furious rally in energy and food prices. Indeed, a lasting spike in fuel and food costs would unravel progress on the inflation front, potentially forcing the Fed to continue its rate-hike campaign for longer than currently expected.
The recent surge in oil prices is making the Federal Reserve’s path toward a 2% inflation target much more difficult.
West Texas Intermediate crude, the U.S. oil benchmark, briefly rose above $92 per barrel earlier this week for the first time since November 2022, sparking fears that a significant source of inflationary pressure is starting to pick up again.
In fact, oil prices have rallied more than 30% since late June amid ongoing supply cuts by Saudi Arabia and Russia, which are putting a squeeze on the market.
Wall Street analysts are
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