Fed’s interest rate pause is ‘logical’ – but watch out for more hikes, says NCSU economist

Editor’s note: Dr. Mike Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University and is a frequent contributor to WRAL TechWire.

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RALEIGH – The Federal Reserve’s decision to pause interest rate hikes is a “logical at this time,” says N.C. State economist Dr. Michael Walden. Yet what’s coming is hard to predict.

“At its current meeting, the Federal Reserve [on Wednesday] decided not to raise its key interest rate. This action was widely expected,” Walden tells WRAL TechWire.

However, more hikes are not off the table, he adds.

“But several members of the Fed’s committee indicated they expect further interest rate increases later this year,” Walden explains.

In reviewing the news, Walden points out:

“I think the pause in raising their rate is logical at this time for the Fed. The inflation rate is gradually slowing, which is the Fed’s goal.

“There is also likely some lingering concern about the impact of higher rates on the stability of the banking system. So I think it is wise for the Fed to wait and see what happens in the economy in upcoming months.”

Walden says the future of the inflation fight remains unpredictable.

“If the inflation rate continues to moderate, the Fed may declare victory and end rate increases,” he says. “But if the banking system remains calm, and if the Fed doesn’t see more progress in achieving a lower inflation rate, then they appear to be signaling they’re ready to push up rates more.”