The Federal Reserve recognized on Tuesday that the U.S. central bank must gradually raise interest rates to fight inflation.
They suggested that a healthy labour market and persistently increasing prices may raise borrowing costs.
John Williams, New York Fed president, told reporters, “With the employment market strength, inflation may stay higher than expected. We may need to raise rates “than forecasts.
As of December, most central bankers had suggested that 5.1% would indeed be “adequately stringent” to bring down inflation.
Although, the Fed’s policy rate is now at 4.50%-4.75%.
On Tuesday, Williams said “ending 2023 with the baseline overnight interest rate between 5.00% and 5.50% looks to be the optimal sort of framework” for policy.
The president of the Dallas Federal Reserve, Lorie Logan, recently gave a speech at Prairie View A&M University in Texas, not far from Houston.
She claimed that the Federal Reserve should not establish a final rate due to the “very robust” labor market that is raising salaries and inflation.
“We must keep prepared to continue rate rises for a longer period than originally expected” if the economy weakens.
The two men made their comments after a major government data released in the United States on Tuesday.
The data revealed that consumer price inflation picked up speed in January, albeit yearly growth continued to moderate.
When questioned about the most recent CPI statistics, Richmond Fed President Thomas Barkin told Bloomberg TV, “It’s about as predicted.”
However, inflation would take time to return to the Fed’s 2% objective.
According to the Fed’s chosen metric, inflation is unchanged at 5.0% per year.
Barkin claimed “inflation is stable but coming down slowly.” I think inflation will gain speed and last longer than we’d want.
The inflation data did not alter Patrick Harker’s thinking about raising the policy rate over 5% on Tuesday.
“How much higher depends a lot on what we are seeing today, we had to have an inflation review that really was fantastic because it is moving down, but not fast.”
The Fed was “probably close” to stopping, according to Harker.
Williams also said that interest rates might fall in 2024 if inflation falls. This counteracts any undesirable loosening of conditions.”
Comment Template