It will become increasingly difficult for Federal Reserve (Fed) Chairman Jerome Powell to raise interest rates aggressively. Several economists think so, reports Bloomberg. According to Diana Swonk, chief economist at KPMG LLP, we are approaching “the hardest mile for the Fed in this marathon.”
With inflation reaching nine percent over the past year, Powell and his colleagues have waged a fierce battle to curb price pressures. A 25 basis point rate hike is expected next Wednesday. This may be the last increase. Indeed, there is fragmentation now that inflation remains high and many economists are predicting a recession to come in the coming months.
Tighter credits
The US economy is also currently suffering from credit crunch following the collapse of Silicon Valley Bank and Signature Bank. Bloomberg economists say even tougher conditions are being placed on credit categories, including commercial real estate, because significant losses are expected there. Another major uncertainty is the impending US debt ceiling.
The US government has asked several financial institutions to make a takeover bid for ailing First Republic Bank this weekend. Earlier this year, there was a lot of turmoil around mid-sized banks in the US. Silicon Valley Bank and Signature Bank collapsed in quick succession after customers withdrew large sums of money from their accounts within days. The First Republic actually suffers from the same problem and therefore needs to be saved.
“It’s harder for Powell to keep the group together”
Dreyfus and Mellon chief economist Vincent Reinhart suspects Powell is having “a harder time keeping his group together.” According to Reinhart, for example, there are internal differences of opinion and there will be bitter discussions on the need to raise interest rates even more.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
