Washington: The United States (US) Federal Reserve will likely need to keep interest rates higher for longer in order to firmly bring down inflation, a senior Fed official said.
The Fed has raised its key lending rate 11 times since March 2022, lifting rates to a 22-year high as it looks to bring inflation down to its long-term target of 2 per cent.
Higher rates lower inflation by raising the cost of borrowing, which can cause financial pain for consumers with mortgages and outstanding loans.
Despite falling sharply over the last 12 months, inflation remains stubbornly above target, leading most Fed officials to predict last month that another hike is needed this year.
“The most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals,” Fed Vice Chair for Supervision Michael Barr told a conference in New York in prepared remarks.
“I expect it will take some time,” he continued, adding that his decision would be guided by “a range of incoming data.”
Barr’s comments echo the views of the majority of his colleagues, who recently lowered the number of rate cuts they expect in 2024, suggesting a longer period of high rates.
