Two Fed Officials Said More Rate Hikes are Needed
Two Federal Reserve officials said Monday that more rate hikes are needed to tame inflation that has proven to be more persistent than previously thought.
One was Cleveland Fed President Loretta Mester, who said she thinks rates need to move up "somewhat further" and be held at that level.
Mester said she hasn’t made a decision about whether rates should move up at the next meeting yet but hinted in a speech at the UC San Diego Economics Roundtable that the Fed’s next move could be to raise rates and then hold them at that level to accumulate more data.
"A slightly higher policy rate would roughly equate the probabilities that the next policy move will be a tightening move versus a loosening move," Mester said. "This would be a good holding point as we accumulate more information about whether the economy is evolving as expected."
The central bank decided to hold off raising rates at its last policy meeting in June while signaling rates could still rise to as high as 5.6%, implying two additional rate hikes are likely this year.
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Some Fed officials wanted to raise rates by 0.25% last month but agreed to the pause anyway, according to minutes from that June meeting of the Federal Open Market Committee (FOMC), the Fed committee that decides on policy. The FOMC will meet again later this month, on July 25th and July 26th.
Mester said if she were acting alone last meeting, she would have voted in favor of raising rates, but she added that the Fed doesn’t like to surprise the markets and there was rationale to take a step back and assess the impact of previous rate hikes.