Interest Rates Should be Frozen for ‘Extended’ Time, Warns Fed Official

Interest Rates Should be Frozen for ‘Extended’ Time, Warns Fed Official

Interest Rates Should be Frozen for ‘Extended’ Time, Warns Fed Official

Interest rates should stay on hold for an ‘extended’ period of time, according to Federal Reserve official Neel Kashkari.

Kashkari warned that lowering borrowing costs before inflation was under control would risk US economic prosperity.

The Fed is currently projected to freeze rates at a 23-year high range of 5.25 to 5.5% as officials review personal consumption expenditures inflation against the 2% target, having sat at 2.7% in April.

“The economy is, in the US, quite strong, the labour market is strong, inflation is coming down and many, many people are deeply unhappy about the status of the economy. I think it’s because of the high inflation that they’ve experienced,” Kashkari said.

“Right now, my best guess is we would leave [rates] here for an extended period of time until we get a lot more data to convince us, one way or the other, is underlying inflation really on the way down.”

High borrowing costs has been a contentious theme as US President Joe Biden campaigns for a second term in the White House. The consumer price index is up by more than 19% since Biden took office, despite US post-pandemic growth being the fastest of the G7.

Jason Kurtz, CEO, Basware, commented: “Getting inflation under control is key to reducing pressure on businesses and boosting confidence in the wider global economy. With so many organisations hit by much higher operating costs and interest rates, driving cost savings without compromising productivity remains a boardroom priority.

However, businesses also need to seize the moment to optimise key functions such as finance, to embrace AI and automation, which will improve accuracy whilst reducing overheads. For example, far too many organisations are still being hampered by delayed payments, invoice errors and outdated manual processes, which cannot be allowed to continue when the economic outlook remains difficult to say the least.”

Khalid Talukder, co-founder, DKK Partners said: “It’s no secret that inflation is causing a major headache for global businesses and undermining confidence in the wider economy. Getting inflation rates under control, and keeping them there, will help organisations make more long-term decisions, such as international expansion into new emerging markets. The world takes its lead from The Fed, so getting this decision right is critical for sending a positive message to the global business community.”

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Anas Bouargane

Business Expert

Anas is the founder of CEF Académie, a platform that provides guidance and support for those willing to study in France. He previously interned at Unissey. Anas holds a bachelor degree in economics, finance and management from the University of Toulon.

   
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