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Supporting a rate hike to ensure inflation is fully contained

Published July 26, 2026 at 12:03 PM UTC

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Those who support another rate increase argue that inflation, while lower, is still too high and could reignite if the Fed relaxes too soon. Core inflation, which excludes food and energy, is running at 4.3% — more than double the Fed's 2% target. The labor market remains exceptionally tight, with job openings still elevated and wage growth above pre-pandemic levels. Supporters say a quarter-point hike now would help anchor inflation expectations and prevent the need for larger moves later. They point to the 1970s, when the Fed stopped tightening too early and inflation came roaring back. A rate increase would also send a strong signal that the Fed is committed to price stability, which supports long-term economic growth. Businesses and consumers might face slightly higher borrowing costs in the short term, but that is a price worth paying to avoid persistent inflation that erodes purchasing power and financial stability.