Fed Sees Room for Another Rate Hike as Inflation Looms Large

New York Federal Reserve President John Williams said it's reasonable to consider another US interest rate hike this year to combat inflation risks. The US central bank raised its policy rate last week to a range of 3.75%-4.00% and 16 out of 18 policymakers signaled at least one more rate hike before the end of 2026.

The high levels of uncertainty surrounding the economic outlook are a major concern for policymakers, Williams said. He noted that inflation is the 'big challenge' and that the Fed wants to see not only inflation get back to its 2% target but also in a timely manner.

Fed officials now expect inflation won't be back at target until 2029. Futures markets are putting strong odds of another increase to borrowing costs at the Fed's October policy meeting, as well as another increase in December.