The Fed’s George sees the policy interest rate close to 2% in August

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Esther George, president of the Kansas City Federal Reserve, said Monday that she expects the US Federal Reserve to raise its target interest rate to about 2% by August, depending on how both supply and demand are affecting inflation.

“Fed policymakers have reaffirmed their commitment to take swift action to restore price stability, and I expect further rate hikes to bring the federal funds rate closer to 2% by August, a significant step towards a change in policy settings,” George said in a statement. Kansas City ready for distribution at an agricultural symposium by the Fed. “Evidence that inflation is clearly declining will lead to a verdict on tightening.”

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The Fed has raised interest rates to keep inflation in check, raising the cost of 40-year high, short-term debt from zero to 0.75% -1% this year. Fed Chair Jerome Powell has indicated that the central bank will raise another full percentage points in the next two Fed meetings in June and July.

Since then, the central bank’s move has been the subject of much debate among policymakers. George used most of the comments he made to outline cross-currents affecting the US economy, which are so difficult to judge what will happen to inflation: Russia’s war and China’s COVID-19 lockdown could, for example, hurt global growth and reduce inflationary pressures. Or they could further disrupt world productivity and increase inflationary pressures.

“The job of the central bank is to keep persistent imbalances out of the expectation of inflation and uninterrupted inflation,” George said.

Fed interest rate hikes can only reduce demand and not affect supply factors that greatly affect inflation, he said. “The evolution of its efforts, among other factors, will affect the direction of monetary policy, requiring constant and careful monitoring.” (Reporting by Ann Safi; Editing by Leslie Adler)

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