The Federal Reserve is expected to continue raising interest rates gradually, potentially increasing borrowing costs again in December and at least once more in 2027, as it seeks to rein in inflation, which has exceeded the Fed’s 2% target for nearly six years, The New York Times reports.
October’s jobs report reinforced that approach, showing strong employment growth and a decline in unemployment to 4.1%, while wage growth remained relatively modest at 3.1% year over year. That combination suggests the labor market is not adding significant inflationary pressure, allowing policymakers to focus primarily on rising prices.
The main inflation drivers include an energy shock stemming from the war with Iran, which has sharply increased oil prices, and increased spending by technology companies investing in artificial intelligence. Meanwhile, Democrats’ sweeping midterm election victories have raised concerns about increased AI scrutiny and regulation.
Fed Chair Kevin Warsh acknowledges that financial conditions have tightened but says they’re not yet restrictive enough to derail the central bank’s gradual approach. He emphasizes that the Fed does not want to unnecessarily weaken economic growth or increase unemployment.
However, fresh evidence of accelerating inflation, particularly if price pressures begin spreading into the labor market, could prompt policymakers to raise rates more aggressively, either through faster increases or a greater overall number of hikes.
The New York Times has the full story. A subscription may be required.
