Policy makers pointed out Federal Reserve (US central bank) They indicated they would press ahead with rate hikes, with a number of them backing a higher interest rate of at least 5% even as signs emerged that inflation had already peaked and economic activity was slowing.
Cleveland Federal Reserve Chair Loretta Mester said in an interview with The Associated Press on Wednesday, “I think we need to continue, and we’ll discuss at the meeting how much more needs to be done.”
Meester added that she expects the interest rate will need to go “a little higher” and stay at that level for some time to slow inflation further.
Meester’s comments appeared to reflect a view widely shared by fellow policymakers, 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 at the end of its January 31-February 1 meeting.
But slowing spending, inflation and manufacturing, announced on Wednesday, helped support expectations that the Fed will end its current round of rate hikes sooner than Mester and most of her colleagues expected, with an interest rate just under 5%.
Like Meester, St. Louis Federal Reserve Chairman James Bullard said in an interview with The Wall Street Journal that he also expects the interest rate to rise to the range of 5.25-5.5%, adding that policy makers should get past 5% “as soon as possible.” We can.”
A number of US central bank officials have expressed support for slowing rate hikes to a quarter of a percentage point, after a much faster pace last year of 75 and a half percentage point increases.
But Bullard showed impatience, and when asked if he was open to a half-percentage-point increase at the next Fed meeting, he asked: “Why don’t we go where we’re supposed to go? Why procrastinate?”
A partial answer can be found in the latest “Beige Book” report, published by the Federal Reserve on Wednesday, as a compilation of survey data from central bank districts across the country showed a continued rise in prices, but at a slower pace in most regions.
Employment continued to grow at a “slight to moderate” pace in most parts of the country, and several regions reported modest economic growth.
However, policy makers in the US Federal Reserve say that the mistake they do not want to make is to stop before inflation is defeated and to have to raise interest rates at a higher rate to defeat it later, as happened in the 1970s and 1980s.
Even Philadelphia Fed Chairman Patrick Harker, who is generally less hawkish than Mester or Bullard and wants to shift to quarter-percentage-point increases in the future, predicted “further” hikes in borrowing costs before stalling.
Federal Reserve Chairman Jerome Powell said after a policy meeting last month that the battle for inflation was not won and that there would be further interest rate increases in 2023.
It is noteworthy that Powell tested positive for the Corona virus on Wednesday and suffers from mild symptoms.