Federal Reserve Bank Officials Consider Higher Interest Rate Peaks Following January Job Report
By The U.S. Federal Reserve Bank of Atlanta President Raphael Bostic said this week that January’s strong labor-market report raises the possibility that the central bank will need to increase interest rates to a higher peak than policymakers had previously expected.
In an interview with Bloomberg News on Monday, Bostic said that the strong payroll report could suggest the need for rates to peak at higher levels and policymakers would be studying the data to see if the January numbers were an anomaly.
The data released last week showed 517,000 new jobs were added to the U.S. economy in January, more than double the 185K expected, while the unemployment rate fell to 3.4%, its lowest level since 1969.[0]
Last week, the Federal Open Market Committee increased its benchmark rate by a quarter of a percent, making the range 4.5% to 4.75%.[1] In December, there was a 0.5 percentage point increase, and before that there had been four large 0.75 percentage point increases.[1]
Jerome Powell, the Chair of the Federal Reserve, communicated to the press on February 1 that officials anticipate providing a couple of additional increases in interest rates before pausing their intense tightening strategy.[1]
Minneapolis Federal Reserve Bank President Neel Kashkari said the report shows the US central bank needs to keep raising interest rates.[2]
“We have to bring labor market into balance, haven't done enough yet,[4] Kashkari said. [4]I'm not changing my forecast for rates for now, but I wish we saw more evidence underlying inflation was trending down more.[3][4]
Bostic said that if a stronger-than-expected economy persists, “It’ll probably mean we have to do a little more work,” and “I would expect that would translate into us raising interest rates more than I have projected right now.”[5]
San Francisco Federal Reserve President Mary Daly is the first Fed official to speak after US central bankers met earlier this week and Chair Jerome Powell addressed the media on Wednesday in Washington.[6]
The outlook for the U.S. economy and the Fed’s rate-setting policy is uncertain, though Bostic said he hasn’t seen anything yet to lower his rate path.
0. “‘Wow,’ says Fed’s Daly after killer jobs report, but it doesn't alter Fed's inflation-fighting plan” MarketWatch, 3 Feb. 2023, https://www.marketwatch.com/story/wow-feds-daly-says-after-killer-jobs-report-but-it-doesnt-alter-feds-inflation-fighting-plan-11675454143
1. “Fed’s Bostic Says Higher Peak Rate on Table After Jobs Blowout” Yahoo! Voices, 6 Feb. 2023, https://www.yahoo.com/now/fed-bostic-says-higher-peak-204653762.html
2. “Fed’s Kashkari Says Strong Jobs Data Show Need for More Hikes” BNN Bloomberg, 7 Feb. 2023, https://www.bnnbloomberg.ca/fed-s-kashkari-says-strong-jobs-data-show-need-for-more-hikes-1.1880463
3. “Fed's Kashkari: Nobody should overreact to one report” ForexLive, 7 Feb. 2023, https://www.forexlive.com/centralbank/feds-kashkari-nobody-should-overreact-to-one-report-20230207/
4. “ICYMI – Fed's Bostic says interest rates may need to rise higher than he thought” ForexLive, 6 Feb. 2023, https://www.forexlive.com/centralbank/icymi-feds-bostic-says-interest-rates-may-need-to-rise-higher-than-he-thought-20230206/
5. “Fed's Kashkari tells CNBC rates headed to 5.25-5.5%” ShareCast, 7 Feb. 2023, https://www.sharecast.com/news/international-economic/feds-kashkari-tells-cnbc-rates-headed-to-525-55–12235056.html
6. “Fed Daly to speak on FOXBusiness at the 1430 ET” ForexLive, 3 Feb. 2023, https://www.forexlive.com/centralbank/fed-daly-to-speak-on-foxbusiness-at-the-1430-et-20230203/
