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.”
Photo: Reuters
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.
CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’ US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said. Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said. He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation. Trump has claimed that Taiwan took up to
A start-up in Mexico is trying to help get a handle on one coastal city’s plastic waste problem by converting it into gasoline, diesel and other fuels. With less than 10 percent of the world’s plastics being recycled, Petgas’ idea is that rather than letting discarded plastic become waste, it can become productive again as fuel. Petgas developed a machine in the port city of Boca del Rio that uses pyrolysis, a thermodynamic process that heats plastics in the absence of oxygen, breaking it down to produce gasoline, diesel, kerosene, paraffin and coke. Petgas chief technology officer Carlos Parraguirre Diaz said that in
SUPPORT: The government said it would help firms deal with supply disruptions, after Trump signed orders imposing tariffs of 25 percent on imports from Canada and Mexico The government pledged to help companies with operations in Mexico, such as iPhone assembler Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), shift production lines and investment if needed to deal with higher US tariffs. The Ministry of Economic Affairs yesterday announced measures to help local firms cope with the US tariff increases on Canada, Mexico, China and other potential areas. The ministry said that it would establish an investment and trade service center in the US to help Taiwanese firms assess the investment environment in different US states, plan supply chain relocation strategies and
Japan intends to closely monitor the impact on its currency of US President Donald Trump’s new tariffs and is worried about the international fallout from the trade imposts, Japanese Minister of Finance Katsunobu Kato said. “We need to carefully see how the exchange rate and other factors will be affected and what form US monetary policy will take in the future,” Kato said yesterday in an interview with Fuji Television. Japan is very concerned about how the tariffs might impact the global economy, he added. Kato spoke as nations and firms brace for potential repercussions after Trump unleashed the first salvo of
RSS