Federal Reserve policymakers have signaled they will continue with rate hikes, with some of them advocating for an interest rate higher by at least 5% even with signs that inflation has already peaked and economic activity is buoyant. slowing down.
Cleveland Federal Reserve Chair Loretta Mester said Wednesday in an interview with the Associated Press: “I think we need to continue and during the meeting we will discuss how much more needs to be done.”
Meester added that he expects the interest rate to go up “a little more in high” and stay at that level for some time to further slow inflation.
Meester’s comments appeared to reflect a view widely shared by fellow politicians, according to Reuters.
The overnight lending rate is currently in the target range of 4.25-4.5%, and investors expect the Fed to raise this rate by a quarter of a percentage point by the end of its January 31-February 1 meeting.
But the slowdown in spending, inflation and the manufacturing sector announced Wednesday helped bolster expectations that the Fed will end its current round of rate hikes sooner than Mester and most of his peers expected, with a interest rate just below 5%.
As Meester said, St. Louis Federal Reserve Chairman James Bullard said in an interview with the Wall Street Journal that he too expects the interest rate to rise in the range by 5.25-5.5%, adding that policy makers should go above 5% “as soon as practicable.” We can.”
A number of US central bank officials expressed support for slowing rate hikes to a quarter of a percentage point, after a much faster pace last year of hikes of 75.5 percentage points.
But Bullard showed impatience, and when asked if he was open to a half-percentage point hike at the next Fed meeting, asked, “Why don’t we go where we should go? Why procrastinate?”
A partial answer can be found in the latest “Beige Book” report, released Wednesday by the Federal Reserve, as a compilation of polling data from central bank districts in all over the country showed a continuous increase in prices, but at a slower pace in most regions.
Employment continued to grow at a “mild to moderate” pace in most of the country, and several regions experienced modest economic growth.
However, US Federal Reserve policy makers say the mistake they don’t want to make is to stop before inflation is defeated and have to raise interest rates to a higher rate to defeat it. in followed, as happened in the 70s and 80s.
Even Philadelphia Fed Chairman Patrick Harker, who is generally less aggressive than Mester or Bullard and wants to move to quarter-percentage point hikes in future, it predicted “further” increases in borrowing costs before stalling.
Federal Reserve Chairman Jerome Powell said after a policy meeting last month that the battle for inflation has not been won and that there would be more interest rate hikes in 2023.
Interestingly, Powell tested positive for the Corona virus on Wednesday and is suffering from mild symptoms.
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