Will there be a rate hike after the summer to stop inflation?

The Federal Reserve, the body that organises and fits the base interest rate in the US, has its next meeting at the end of the month.

Over the last year the Fed has been increasing interest rates in an attempt to temper inflation, which nearly reached double digits at the turn of the year. However, with inflation coming down swiftly it took the decision not to raise interest rates in June.

Based on the inflation data from June, the year-over-year inflation rate tracked by the CPI stands at three percent. This is only a single percentage point from the target of two percent and is the lowest amongst the G7 economic group.

Will the next meeting lead to a raise?

If it is decided that inflation is still not approaching that hallowed two percent then the feeling is the Fed will act in July and potentially September too.

“Since the June meeting, with another month of data to evaluate lending conditions, I am more confident that the banking turmoil is not going to result in a significant problem for the economy, and I see no reason why the first of those two hikes should not occur at our meeting later this month,” said Fed Governor Christopher Waller last week, indicating the assuredness felt at the next moves.

The pause in June was announced to be because of uncertainty of interest rate effects on the banking sector, which was hit by two collapses. There have been none since and increased resilience; by the Fed’s own measures they can proceed.

Eyes will turn to the following meeting in September.

“If inflation does not continue to show progress and there are no suggestions of a significant slowdown in economic activity, then a second 25-basis-point [quarter-point] hike should come sooner rather than later,” Governor Waller continued. “But that decision is for the future.”