US inflation outlook worsens – Fed spokesman

WASHINGTON, DC: The inflationary picture in the US has worsened since the start of the year, which could prolong the Federal Reserve’s (Fed’s) ongoing struggle with rising prices, a senior Fed official warned Friday.

The central bank “may have more work to do” in fighting inflation if the data “show continued economic strength and slower disinflation,” Lisa Cook, a voting member on the Fed’s rate-setting committee, said in prepared comments to the Ohio economic conference. .

Since March 2022, the Fed has rapidly raised its benchmark lending rate nine times in a row in an aggressive attempt to lower historically high inflation to its long-term target of 2 percent, but the recent turmoil in the banking sector has been fueled by a sharp crash. Silicon Valley bank amid concerns about its exposure to interest rates forced the Fed to rethink a larger hike in March.

Instead, he opted for a smaller increase of a quarter percentage point.

Fed Chairman Jerome Powell suggested after the decision that the Fed could raise interest rates one more time before completing the current cycle of hikes.

Data released earlier on Friday showed that the Fed’s preferred rate of inflation slowed last month, providing some relief as it struggles to balance the fight against higher prices with banking woes.

But in her Friday speech, Cook warned that core inflation, which rules out food and energy price volatility, remains well above the level the Fed would like to see.

“The inflationary picture is even less favorable than at the beginning of this year,” she said.

“Overall, the incoming data suggests slightly higher inflation this year and stronger economic growth.

But Cook added that she would be “closely monitoring developments in the banking sector, which could tighten credit conditions and offset some of that momentum” in the economy.

“The process of bringing inflation back to 2 percent has a long way to go and is likely to be uneven and bumpy,” she said.