- US Federal Reserve officials flag possibility of sharper interest rate hikes to limit the surge in inflation
- The US unemployment rate currently sits at 3.8 per cent and job vacancies are at a record high, pushing wages up at a fast rate
- The mention of rate hikes has prompted a surge of bets in futures markets on half-point interest rate rises in May and June
- Many are predicting the federal funds rate will jump to between 2.25 and 2.5 per cent before the end of the year
US Federal Reserve officials have flagged the possibility of sharper interest rate hikes to limit the surge in US inflation.
The country’s unemployment rate currently sits at 3.8 per cent and job vacancies at a record high, pushing wages up at a fast rate.
Combined with the rising prices triggered by supply issues from Russian sanctions, inflation has become a top priority to regulate.
The Federal Reserve last week increased rates by a quarter of a percentage point.
On Monday, US Federal Reserve Chairman Jerome Powell warned the central bank would need to take action in order to restore price stability.
“The labour market is very strong, and inflation is much too high,” he said.
“There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability.”
St Louis Fed President James Bullard and Cleveland Fed President Loretta Mester echoed the sentiments, raising concerns over Russia’s Ukraine war driving up prices on affected supply chains.
The mention of rate hikes has prompted a surge of bets in futures markets on half-point interest rate rises in May and June. Many are predicting the US federal funds rate will be lifted to between 2.25 and 2.5 per cent before the end of the year.
The Federal Reserve has six remaining scheduled meetings left this year, with the next one to be held in May.