New York Fed President John Williams said this week that the Federal Reserve may need to raise interest rates to a “sufficiently restrictive level” in order to achieve its goal of 2% inflation. This statement was echoed by other Fed officials and governors who said more rate hikes are needed to curb inflation.
Fed Governor Lisa Cook said on Wednesday that inflation is still running too high, even though it has moderated. She added that the labor market is “historically strong” while inflation remains elevated, and called for more action from the Fed to address the situation. Cook also said that the Fed should move in “smaller steps” as it assesses the cumulative impact of its rate increases so far.
Fed Governor Michelle Bowman said on Monday that they are still far from achieving price stability and that it will be necessary to further tighten monetary policy to bring inflation down. She noted that doing so will likely lead to subdued growth in economic activity and some softening in labor-market conditions.
In addition, Minneapolis Fed President Neel Kashkari said that rates will need to rise higher to combat wage growth, and that there is not yet much evidence that the rate hikes that have been done so far are having much of an effect on the job market.
Williams noted that the projections that officials penciled in for raising the federal funds rate this year to between 5% and 5.25% provide “a very reasonable view of what we’ll need to do this year in order to get…inflation down.” He added that, if financial conditions loosen too much, the Fed would have to go higher on rates.
Overall, the Federal Reserve officials emphasised the necessity of continuing to raise interest rates, as well as the possibility that, given sustained price pressures, borrowing costs may peak at a higher level than initially anticipated. They also noted that the labor market was “extraordinarily” tight and the backlog of demand in the economy remained “strong.
0. “Fed's Cook: Will need restrictive monetary policy for some time” FXStreet, 8 Feb. 2023, https://www.fxstreet.com/news/feds-cook-will-need-restrictive-monetary-policy-for-some-time-202302081501
1. “Fed's Cook eyes more hikes to reach 2% inflation target” National Mortgage News, 8 Feb. 2023, https://www.nationalmortgagenews.com/news/feds-cook-eyes-more-hikes-to-reach-2-inflation-target
2. “Fed’s Bowman says more rate hikes needed to rein in price growth” BusinessLIVE, 13 Feb. 2023, https://www.businesslive.co.za/bloomberg/news/2023-02-13-feds-bowman-says-more-rate-hikes-needed-to-rein-in-price-growth
3. “In Pics | US Fed officials continue to be hawkish, say inflation job not yet done” Moneycontrol, 9 Feb. 2023, https://www.moneycontrol.com/news/photos/world/in-pics-us-fed-officials-continue-to-be-hawkish-say-inflation-job-not-yet-done-10039771.html
4. “Nasdaq 100 uptrend intact after Fed Williams rehashes Powell” FOREX.com, 8 Feb. 2023, https://www.forex.com/en/market-analysis/latest-research/nasdaq-100-uptrend-intact-after-fed-williams-rehashes-powell
5. “Fed's Williams says there's still ‘work to do', ‘a lot of uncertainty ‘ around inflation outlook” ShareCast, 8 Feb. 2023, https://www.sharecast.com/news/international-economic/feds-williams-says-theres-still-work-to-do-a-lot-of-uncertainty-around-inflation-outlook–12256338.html