During the June FOMC meeting, the US Federal Reserve decided not to raise the federal funds rate. Jerome Powell, the chairman, stated that the upcoming July meeting would be “live” and determine if the interest rate would increase. Powell later testified that the benchmark rate is likely to rise this year. Mary Daly, president of the San Francisco Federal Reserve Bank, believes two more rate hikes are reasonable but emphasized caution due to the rate’s 16-year high. Daly highlighted the importance of a measured approach and referenced the destabilizing effect of abrupt action. She stated that a slower pace is needed to save Americans from stopping short or going too far. Daly wants to restore price stability carefully to avoid tripping the economy into an unforced error. Inflation remains above the 2% target, and Americans are relying on credit cards to mitigate inflationary pressures. Daly is uncertain if a more restrictive monetary policy will achieve balance and states that the terminal rate must be determined by data.
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