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MNI INTERVIEW: Kohn Sees Upside Risks To Fed Funds Rate Peak

(MNI) WASHINGTON

Hot labor market makes fighting inflation without a downturn a "delicate balance," says former vice chairman of the Fed.

Federal Reserve policymakers could be forced to raise interest rates more than their own forecasts and market expectations suggest because of persistent inflation pressures and a strong labor market, former Fed Vice Chair Donald Kohn told MNI.

Fed officials in June said rates were likely to peak around 3.8% and investors now see them topping out at 3.75% in March of 2023. Kohn told MNI’s FedSpeak podcast that “sticky” inflation pressures raised the chances that fed funds might need to go even higher.

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Federal Reserve policymakers could be forced to raise interest rates more than their own forecasts and market expectations suggest because of persistent inflation pressures and a strong labor market, former Fed Vice Chair Donald Kohn told MNI.

Fed officials in June said rates were likely to peak around 3.8% and investors now see them topping out at 3.75% in March of 2023. Kohn told MNI’s FedSpeak podcast that “sticky” inflation pressures raised the chances that fed funds might need to go even higher.

Keep reading...Show less