Ahead of the next interest rate meeting in early May, several Fed officials are in favor of another hike. There are unlikely to be any interest rate cuts this year.
The US Federal Reserve (Fed) will decide on its future interest rates on May 3rd. But many Fed officials are already calling for more tightening. Cleveland Fed President Loretta Mester publicly advocated a further increase in the key rate to over five percent. Inflation is simply still too high. At the same time, she argued that in view of the recent banking turmoil, caution should be exercised in order not to worsen credit conditions for companies and households too much. “We’re a lot closer to the end of the tightening than we were to the beginning,” she reassured an audience in Akron, Ohio, on Thursday.
However, Mester is not a member of the so-called Federal Open Market Committee this year and is therefore not allowed to vote on the interest rate for 2023. Patrick Harker, head of the Fed in Philadelphia, is entitled to vote. But Harker takes a similar stance: “I suspect additional tightening may be needed to ensure policies are restrictive enough to support both pillars of our dual mandate.” Harker is thus pointing to the two equally important Fed goals of price stability and “maximum employment”.