FILE Ñ Jerome Powell, chairman of the Federal Reserve Board of Governors, speaks to reporters in Washington on May 3, 2023. Powell has hinted that central bankers could allow themselves time to judge how their interest rate increases are affecting the economy. (Pete Marovich/The New York Times)

Last week, the U.S. central bank raised the interest rates for the 11th time since March 2022. They are hopeful that this action can help control inflation without badly affecting jobs. However, they also said that interest rates need to remain high for a while to achieve this.

Austan Goolsbee, the President of the Chicago Federal Reserve Bank, expressed optimism, saying, “I hope that we can reduce inflation gradually without causing a big rise in unemployment.” He believes that improvements in inflation are important for the bank’s decision-making process. Goolsbee, along with other U.S. central bankers, agreed to raise the Federal Reserve’s policy rate by 0.25%, bringing it to between 5.25% and 5.50%.

This happened after they had previously decided not to raise the rate for the first time since they started doing so in March 2022. In June, the Federal Reserve indicated that it may have to raise the rates further, possibly above 5.5%, before the end of the year. According to Goolsbee, the decision in the Fed’s next meeting in September will depend on what happens with prices. Atlanta Fed President Raphael Bostic also spoke about the issue. Even though he won’t be voting on Federal Reserve policy until next year, he mentioned that he would have supported the July rate hike. However, if the economy develops as he expects, he would not support another rate hike in September.

Bostic also mentioned that inflation, according to the Federal Reserve’s favorite measure, the personal consumption expenditures index, has decreased significantly. This is a promising sign towards reaching the Fed’s 2% goal. As inflation continues to fall, Bostic expects unemployment to rise only slightly, if at all. But he also mentioned that inflation will probably reduce slowly and only if the Fed continues to maintain high interest rates. He does not expect any reductions in rates until the second half of next year at the earliest.

Goolsbee agreed with this, saying any rate cuts would be in the distant future. For now, he believes the Federal Reserve is on a good path, successfully lowering inflation without causing a recession. However, he also noted that it’s a delicate balance to maintain.