The US Federal Reserve's persistent strategy of increasing interest rates to combat inflation and subsequently maintaining them at elevated levels has sparked a contentious debate in Western financial markets. While US Federal Reserve officials emphasise the necessity of a restrictive monetary policy to rein in inflation and bring it down to the Fed's 2% target, there remains an underlying dispute regarding the potential for another rate hike later this year.

It's crucial to note that inflation in the United States has been relatively well-contained for over a year, a far cry from the double-digit inflation still plaguing certain regions in Europe. Nevertheless, central bankers' approach to monetary policy remains notably conservative.

One of the paramount concerns facing the US economy is its staggering national debt, which surpasses that of most Western economies. Surprisingly, despite this financial burden, the US dollar continues to exhibit strength, notably gaining significant ground against the British pound in recent weeks.

"Inflation continues to be too high, and I expect it will likely be appropriate for the (Fed) to raise rates further and hold them at a restrictive level for some time," remarked Fed Governor Michelle Bowman in her prepared remarks to a banking conference. She affirmed her willingness to support a future federal funds rate increase if incoming data indicates a halt or inadequate progress in achieving the 2% inflation target.

Inflation, as gauged by the consumer price index, has receded from approximately 9% last year to about 3.7% in the latest reading, partly due to the Fed's cumulative 5.25 percentage points of interest rate hikes over the past 18 months.

Despite this notable progress, the majority of central bankers last month chose to maintain the policy rate within the current 5.25%-5.50% range, even though most signalled a probable need for another rate hike before the year's end.

Addressing a separate event in New York, Fed Vice Chair for Supervision, Michael Barr, expressed his belief that rates are currently "at or very near" a sufficiently restrictive level.

While this sentiment has been echoed previously, the continuation of rate hikes warrants close monitoring. The trajectory of the US dollar against other major currencies also demands scrutiny, particularly in light of inflation disparities between Europe and the United States.

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