Federal Reserve officials are girding for an extended term of high interest rates, including a return to a 50-basis point hike in March, saying creeping inflation makes the 25-basis point quantum that the central bank agreed on this month untenable.
WASHINGTON (Pakistan Point News / Sputnik - 18th February, 2023) Federal Reserve officials are girding for an extended term of high interest rates, including a return to a 50-basis point hike in March, saying creeping inflation makes the 25-basis point quantum that the central bank agreed on this month untenable.
"We need to continue rate hikes until we see more progress," Fed Governor Michelle Bowman said Friday. "Inflation is still far too high. Your guess is as good as mine as to what happens next in the economy."
Richmond Fed President Tom Barkin concurred, saying controlling inflation would require more rate increases. "How many, we'll have to see," he added.
The comments by Bowman and Barkin came on the heels of more rate warnings earlier in the week from other officials at the central bank.
Cleveland Fed chief Loretta Mester said Thursday US interest rates need to rise to above 5% and remain there an extended time in order to bring inflation down meaningfully.
St. Louis Fed President James Bullard, often viewed as the most hawkish official at the central bank, also said on Thursday he hadn't been in favor of lowering the quantum of rate hikes � something that happened the last two months � until inflation was under better control.
Bullard added that he would support a 50-basis point hike at the Fed's next rate decision on March 22, after the 25-basis point increase on February 1.
Former Treasury Secretary Lawrence Summers, in rounding up the Fed rhetoric, said there's a risk of the "Fed hitting the brakes very, very hard."
"A broadening in US price pressures shows that the Federal Reserve's monetary tightening to date is having a limited impact, raising the danger of policymakers having to do more than previously envisioned," Summers added.
The Fed added 450 basis points to rates since March via eight hikes, in its bid to control runaway inflation. Rates currently stand at a peak of 4.75%.
Inflation, as measured by the Consumer Price Index, grew by an annualized rate of 6.4% in January. The Fed's target for inflation, meanwhile, stands at 2% per year.
Rate expectations for the Fed's March 22 policy meeting, monitored by foreign exchange traders, remained at 25 basis points on Friday, though that could change with the increasing calls for tighter policing from the central bank's hawks.
