Although inflation showed signs of cooling, several Federal Reserve (Fed) officials released “hawkish signals” once more on Wednesday (18th), reiterating their support for raising the Fed’s terminal interest rate to above 5%.
The Fed holds a monetary policy meeting from Jan. 31 to Feb. 1, and traders widely expect the Fed to hike rates by a quarter following raising rates by two quarters in December, even as there are more signs of a weakening economy And inflation is cooling, and many Fed officials expressed support for raising the terminal interest rate above 5%.
2023 Voting Member, President of the Dallas FedLogan (Lorie Logan) on Wednesday made the case for a slower pace of rate hikes to improve the ability to adjust monetary policy in response to an uncertain economic outlook, but she also suggested that rates might end up rising more than many now expect.
“We will likely need to gradually raise rates until we see convincing evidence that inflation is on track to return to the 2% target in a sustainable and timely manner,” Logan said.
Logan added: “The most important risk is that if too little tightening is done, the economy will continue to overheat, the Fed will be unable to control inflation, and the opposite risk of overtightening and weakening the labor market is more than necessary.”
Contrary to the view that most officials have slowed down the pace of rate hikes, the Fed hawk and the head of the St. Louis Federal Reserve Bankbrad (James Bullard) on Wednesday called for the federal funds rate to rise above 5% as soon as possible to ensure that inflationary pressures subside.
Bullard predicted a rate range of 5.25% to 5.5% by the end of this year, and asked rhetorically: “Why not move up to the range where it should be? Why delay?”
President of the Federal Reserve Bank of ClevelandMeister “Given my forecast for the economy, the terminal rate needs to be raised above 5 percent,” said Loretta Mester.
Mester did not comment on the extent of the next rate hike, but she emphasized: “The ultimate policy rate target range may need to be ‘a bit higher’ than the 5.00%-5.25% range that most people expect, and remain there for a period of time to further slow the rate. Inflation.”
This year’s Federal Open Market Committee (FOMC) voting committee, Philadelphia Federal Reserve Bank Presidenthack (Patrick Harker) reiterated that it is appropriate for the Federal Reserve to raise interest rates by one yard next time. It is predicted that the federal funds rate will exceed 5%, and there will be several interest rate hikes in the future, and the uncertainty of the terminal interest rate is that the Federal Reserve should slow down The reason for the pace of interest rate hikes.
Harker said: “High inflation is a scourge that makes the economy inefficient and seriously hurts Americans with limited incomes. To control inflation, the Fed’s goal is to moderately slow the economy and bring demand more in line with supply. Let’s sit above 5% and wait for a while to see how the economy performs, there is no need to push monetary policy to a level where it would be a serious drag on economic activity.”