US Federal Reserve officials said there is a need for further interest rate increases to help tame inflation, but expressed differing views on when the central bank would stop the hikes, after new data showed signs of persistent price pressures.
Several officials on Tuesday said that interest rates might need to move to a higher level than anticipated to ensure that inflation continues to ease.
Richmond Fed President Thomas Barkin told Bloomberg in an interview that “if inflation persists at levels well above our target, maybe we’ll have to do more.”
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Speaking at Prairie View A&M University in Texas, Dallas Fed President Lorie Logan said: “We must remain prepared to continue rate increases for a longer period than previously anticipated, if such a path is necessary to respond to changes in the economic outlook or to offset any undesired easing in conditions.”
The two officials’ comments came shortly after data showed consumer prices last month climbed 6.4 percent from a year earlier, higher than economists expected and still far above the Fed’s goal of 2 percent annual inflation, which is based on a separate measure.
Philadelphia Fed President Patrick Harker later in the day said he believes policymakers would need to raise interest rates above 5 percent and possibly higher to counter inflation, which is easing only slowly.
“We’re going to have to let the data dictate that,” Harker said as he answered questions from the audience after a speech at La Salle University. “It’s going to be above 5 percent in the Fed Funds rate. How much above 5? It’s going to depend a lot on what we’re seeing.”
New York Fed President John Williams on Tuesday said that having the Federal Funds rate in a range of 5 to 5.5 percent by the end of the year — as listed in Fed officials’ estimates in December last year — is the appropriate framing.
“I do think with the strength in the labor market, clearly there’s risks that inflation stays higher for longer than expected or that we might need to raise rates higher than that,” he told reporters after a speech at the New York Bankers Association.
Williams said he was confident that higher rates would continue to bring inflation down toward the Fed’s 2 percent goal, but added that the job was not yet done.
The overall consumer price index last month climbed 0.5 percent from the previous month, bolstered by gasoline and housing costs, the US Department of Labor reported.
That was in line with economists’ expectations, but marked the biggest increase in three months.
“Inflation is normalizing, but it’s coming down slowly,” Barkin said.
While all local Fed heads participate in meetings of the central bank’s policy committee, Logan and Harker are voting members this year, while Barkin is not. Williams, as New York Fed president, is a permanent voting member, along with the Fed’s seven governors.
On Tuesday, the S&P 500 Index fell and US Treasury yields jumped following the latest inflation data.
Investors now give near-even odds that Fed officials would raise rates by a quarter percentage point in June, following similar increases in March and May.
Economists at Barclays PLC and Monetary Policy Analytics now see the Fed lifting rates to between 5.25 and 5.5 percent.
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