Federal Reserve policymakers were out in force (6 of them to be precise) signaling they will push on with more interest rate hikes, with several supporting a top policy rate of at least 5% even as inflation shows signs of having peaked and economic activity is slowing.
“I just think we need to keep going, and we’ll discuss at the meeting how much to do,” Cleveland Fed President Loretta Mester said in an interview with the Associated Press.
The remarks appeared to reflect a widely shared view among her fellow policymakers, most of whom as of December had penciled in a 5.00%-5.25% policy rate in coming months.
Mester said that for her part she expects the Fed’s policy rate to need to go “a bit higher” than that, and stay there for some time to further slow inflation.
The Fed’s benchmark overnight lending rate currently sits in a target range of 4.25% to 4.50%, and investors expect the Fed to lift that rate by a quarter of a percentage point at the end of its Jan. 31-Feb. 1 meeting.
St. Louis Fed President James Bullard, speaking with the Wall Street Journal earlier, said he sees the policy rate rising to the 5.25%-5.50% range, and added that policymakers should get it above 5% “as quickly as we can.”
Several Fed officials have expressed support for slowing to quarter-percentage-point rate increases, after last year’s much faster pace of rate hikes in mostly 75-basis point and half-point increments.
Bullard expressed more impatience. Asked if he was open to a half-percentage-point increase at the Fed’s upcoming meeting, he asked “why not go to where we’re supposed to go? … Why stall?”
Kansas City Fed President Esther George said she felt rates would have to move higher than many of her colleagues anticipate, but that she also would have been willing to move in smaller increments.
Federal Reserve Vice Chair Lael Brainard said that the monetary policy has to be “sufficiently restrictive for some time” in order for inflation to fall back to 2%, as even with the recent moderation the figure remains high.
She asserted that the slowdown in the interest rate hike pace enables Fed to “assess more data as we move the policy rate closer to a sufficiently restrictive level, taking into account the risks around our dual-mandate goals.”
Federal Reserve Bank of New York President John Williams voiced on Thursday that the US Federal Reserve has more rate hikes ahead while stressing that inflation might start to cool off.
“With inflation still high and indications of continued supply-demand imbalances, it is clear that monetary policy still has more work to do to bring inflation down to our 2% goal on a sustained basis,” said Williams. He also noted that a reduction in inflation is likely to require “a period of below-trend growth.” Furthermore, stabilizing prices is essential to ensure maximum employment in the long term.
Federal Reserve Bank of Boston President Susan Collins said on Thursday that she expects the central bank to lift interest rates “just above” 5% and then hold them “at that level for some time.”
Delivering a speech in Boston, Collins expressed her support for slowing down the pace of monetary policy tightening but underlined that Fed’s moves will “depend on a holistic review of available data.” She pointed out that “services inflation remains persistently high” while goods inflation is “noticeably slower,” adding that “labor costs continue to grow more rapidly than is consistent with 2 percent inflation” and that the jobs market needs to be brought “into better balance” for the Fed to meet its inflation target. Nevertheless, Collins also revealed that she is “reasonably optimistic that there is a pathway to reducing inflation without a significant economic downturn.”
NN: No less then 6 Fed governors have warned this week about further interest rate increases. As i pointed out before the street is in denial