On October 11, 2023, Michelle W. Bowman, a member of the Board of Governors of the Federal Reserve System, gave a speech in Marrakech, Morocco, suggesting that there may be another increase in interest rates.

Commenting in more detail on this, Bowman said:

… the Federal Open Market Committee (FOMC) has increased the federal funds target range by 5-1/4 percent and has been reducing the Federal Reserve’s securities holdings, which had increased substantially during the pandemic period.

We have seen some progress on lowering inflation over that time. 

However, inflation remains well above the FOMC’s 2 percent target.

She added:

Domestic spending has continued at a strong pace, and the labor market remains tight.

This suggests that the policy rate may need to rise further and stay restrictive for some time to return inflation to the FOMC’s goal.

Bowman’s fellow board member, Philip N. Jefferson, the Vice Chair of the Board of Governors of the Federal Reserve System, appears to share her views on the level of inflation.

In a speech sharing his outlook on the US economy at the 65th Annual Meeting of the National Association for Business Economics in Dallas, Texas, Jefferson said, “Even though recent inflation data have been encouraging, inflation remains too high.”

Projecting what may happen next, a recent article from Forbes indicated that “November is likely to be the most significant” meeting for the Federal Reserve “and may include an interest rate increase.”

If the US interest rate increases soon, as projected, then it is likely that Cayman banks will follow suit and eventually increase rates for new borrowing. Those who have variable interest rates may also be impacted.

Whether or not those struggling in Cayman can manage another rate hike without falling over the financial edge, however, is a question Cayman policymakers are encouraged to consider. 

If policymakers do consider the potential impacts on locals, it is possible that they may have further dialogue with local banks about options for borrowers. Failing this, it is not unreasonable to suggest that other discussions may take place in the legislature regarding legislative or policy changes to address escalating interest rates.