Recent reports of inflation finally cooling down have prompted the United States Federal Reserve to bring its aggressive run of interest rate hikes to a halt – at least, for now.
The Fed ended its seemingly relentless streak of rate increases which ran for around fifteen months. However, Fed chairman Jerome Powell admitted that the agency may still need to do one more rate hike for this year.
Powell remarked that he and the decision-makers at the Federal Reserve see the prudence of holding a steady target range. Likewise, as the Fed moves forward from its aggressive rate hikes, it has raised its forecast as to where interest rates will be as 2023 draws to a close.
Inflation Slows Down
Recent data from Tuesday, June 13th, shows that the price of consumer goods rose by a conservative 4% in May compared to where they were at the same time last year. This shows that inflation in the United States has slowed down at a greater rate than previously forecast by economists. This is driving hopes that inflation may soon return to more manageable levels.
But while inflation is substantially lower than the peak level seen in the middle of 2022, Fed officials point out that it remains twice as high as its 2% target. Indeed, Powell warned that inflation pressure is still running high and it will take substantially more time before it drops to the 2% ideal.
For just over fifteen months, the Federal Reserve has worked to mitigate increases in the prices of goods and services by way of an economic slowdown which resulted in a significant decrease in consumer demand.
Recent reports over the past several months are proof that this approach has been quite successful, though the country’s gross domestic product (GDP) rose by just around 1.1% over the first quarter of this year.