Federal Reserve officials said Wednesday that interest rates will need to increase further and stay elevated into next year to curb US inflation that’s showing few signs of abating despite the central bank’s most aggressive monetary tightening in a generation. Atlanta Fed President Raphael Bostic wrote in an essay published Wednesday that interest rates would need to rise to between 5% and 5.25% and then remain there “until well into 2024” to help bring aggregate supply and aggregate demand into better balance and thus lower inflation.
Minneapolis Federal Reserve President Neel Kashkari said he is remaining “open-minded” about whether the Fed should raise rates by 25 or 50 basis points at its next policy meeting on March 21-22. The central bank is anticipated to raise the rate by 25 basis points, or 0.25%, according to market forecasts.
Kashkari said, “I’m open-minded, at this point, about whether it’s 25 or 50 basis points,” adding that “what’s more important is what we signal in what’s called the dot plot,” referring to the Fed’s quarterly forecast for the path of its benchmark policy rate.
In December, Kashkari proposed increasing interest rates to 5.4% and keeping them at that level for an extended period. “At this point I haven't decided what my dot is, but I would lean towards continuing to push up my policy path.”
Kashkari declared that reducing inflation is the Federal Reserve's principal task. Although the US economy has yet to enter a recession, past experience demonstrates that stricter monetary policy usually results in one.
Kashakri commented that the inflation report and strong jobs report from the past month were concerning data points, implying that our progress is not as swift as desired. We also don't want to be too extreme in our response.
When asked about cryptocurrencies, Kashkari expressed his skepticism, remarking that it has been 10 years and no one has been able to demonstrate any practical application in the real world.
At its most recent gathering, which took place between January 31st and February 1st, the Federal Reserve increased interest rates by 25 basis points,
0. “Fed Officials Lean Into Higher Rates as Inflation Keeps Going” Bloomberg, 1 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-01/fed-s-kashkari-open-minded-on-quarter-or-half-point-march-hike
1. “Fed's Kashkari ‘open-minded' on raising rates by 25 or 50 bps” msnNOW, 1 Mar. 2023, https://www.msn.com/en-us/money/markets/feds-kashkari-open-minded-on-raising-rates-by-25-or-50-bps/ar-AA186cEp
2. “Fed’s Bostic, Kashkari call for higher rates after ‘concerning' inflation, jobs data” Yahoo News, 1 Mar. 2023, https://news.yahoo.com/feds-bostic-kashkari-call-for-higher-rates-after-concerning-inflation-jobs-data-150224928.html
3. “Fed Kashkari: Risk of under-tightening greater than over-tightening” Action Forex, 1 Mar. 2023, https://www.actionforex.com/live-comments/488860-fed-kashkari-risk-of-under-tightening-greater-than-over-tightening/
4. “Fed Officials Lean Into Higher Rates as Inflation Keeps Going” Yahoo Canada Finance, 1 Mar. 2023, https://ca.finance.yahoo.com/news/fed-kashkari-open-minded-quarter-143731873.html
5. “Fed's Kashkari open minded on whether to hike rates by 25 or 50bp at next meeting” ShareCast, 1 Mar. 2023, https://www.sharecast.com/news/international-economic/feds-kashkari-open-minded-on-whether-to-hike-rates-by-25-or-50bp-at-next-meeting–12523192.html