The US Federal Reserve is still taking a very hard line against inflation. It is raising interest rates at the highest rate in 40 years, and the result is, among other things, a strengthening dollar against all the world’s currencies. However, this policy may soon be coming to an end.
“Fed policy has created a strong dollar,” said James Bullard, head of the Federal Reserve’s Saint Louis branch, during a meeting of International Monetary Fund and World Bank officials in Washington.
The Fed will slow down if inflation falls
According to Bullard, the Fed will ease up on its tightness once it sees that inflationary pressures have been substantially reduced. “And that it will no longer be necessary to raise rates,” James Bullard added. He said that while Fed policy is tight, it has not yet caused serious problems in financial markets. “They’re not zero, but they’re relatively small relative to what you’d expect with such a large rate hike,” Bullard further said.
There will be another interest rate increase
The current level of the Fed’s benchmark interest rate for open market operations is set at 3 to 3.25 percent. And there is likely to be a further increase at the next monetary policy meeting. We will know on November 2, when the Fed announces the results of its monetary policy decision.
