Fed official says rate hike may be needed as inflation pressures build
Cue Writer
A Federal Reserve policymaker’s shift toward a possible rate increase is adding new attention to borrowing costs as inflation remains well above the central bank’s target.
Minneapolis Federal Reserve President Neel Kashkari said Friday that he now expects one interest rate increase may be needed this year, according to CNBC. The change reverses his March view, when he had projected one rate cut by year-end.
The comments came just over a week after the Federal Open Market Committee held its benchmark rate steady. Kashkari’s remarks point to the tougher inflation backdrop facing households, businesses and investors, especially if higher energy costs and supply pressures continue to feed into prices.
Official data released Thursday by the U.S. Bureau of Economic Analysis showed the personal consumption expenditures price index rose 4.1% in May from a year earlier. Core PCE, which excludes food and energy, increased 3.4% over the same period. The Fed’s long-run inflation goal is 2%.
For consumers and small businesses, a higher-for-longer rate path can keep pressure on credit cards, auto loans, mortgages and business financing. In the Virgin Islands and other import-dependent markets, shifts in fuel, shipping and financing costs can also move quickly through household budgets.
Kashkari cited several forces behind the price pressure, including energy disruptions tied to the Middle East, tariffs, supply constraints and heavy investment in data centers and related infrastructure, CNBC reported. Other Fed officials have offered mixed views, leaving upcoming inflation and jobs reports central to the rate outlook.
Sources: CNBC; U.S. Bureau of Economic Analysis.