Several US Federal Reserve (FED) officials stressed the need to apply more interest rate hikes, despite signs in recent months that inflation is moderating in that country.
Both the president of the Atlanta State Fed, Raphael Bostic, and his Richmond colleague, Thomas Barkin, affirmed that inflation continues to be very high and that there is still a long way to go to bring it back to the goal of the monetary entity of 2% per year.
In the case of Bostic, he considered that the rates should be higher than 5% compared to the current level between 4.25% and 4.50%, according to the Bloomberg news agency.
The last minutes of the Fed in December, in fact, showed that most officials project that rates will be above said range by the end of this year, with no forecasts of cuts in them, something that would only remain for 2024.
In addition, it was pointed out that the Fed needs “more evidence to be confident that inflation is on a sustainable downward path.”
In November, inflation was 7.1% per year, far from the Fed’s goal, although below the peak of 9.1% last June, which represented a record in more than 40 years.
Inflation last November was 7.1% per year, far from the Fed’s goal, although below the peak of 9.1% last June, which represented a record in more than 40 years.
With the objective of driving prices down, the Fed carried out one of the fastest rate hike periods in its history, with seven increases since March of last year, at which time, with the aim of boosting the economy in the face of the pandemic, were at levels close to zero.
The monetary authority plans to meet between January 31 and February 1 to adjust the rate again reference.
The market speculates that, with the signs of a slowdown in inflation, the Fed will continue with the increases, but instead of a new 50 basis point hike like last December – the first in that range after a string of four 50 basis point hikes. 75 points-, I veered towards a 25 point upward modification.
Precisely, in an interview with CNBC, Bostic was open, after the dissemination of yesterday’s employment report, to a rise in that range.
“They will surely continue to raise rates at the monetary meeting at the end of this month and again in March, but they will surely do so by 25 basis points instead of 50,” said former Fed Governor Randall Kroszner. .
“They will certainly continue to raise rates at the monetary meeting later this month and again in March, but they will do so by 25 basis points instead of 50”Randall Kroszner
In addition to the monthly price index, another sign of moderation was given by the evolution of wageswhose increase in December was less than expected, as officially reported on Friday.
This data gives more air to a FED that considers that they can push inflation upwards.
In the same way, the entity considers the good numbers in the labor market to be worrying, as there is an “imbalance” with an insufficient supply of workers compared to the demand.
This, from the perspective of the FED, can also lead to an increase in salaries and, therefore, inflation.
The president of the Kansas City Federal Reserve, Esteher George, indicated in this regard that Fed officials “They will undoubtedly face more difficult decisions as the trade-offs between inflation and employment become more apparent.”
“Recent data suggests that workers’ compensation growth has begun to slow,” said Lisa Cook, Governor of the Fed.
Responding to the fear of persistent inflation, he indicated that the agency needs to remain “alert to ensure that cost pressures linked to the pandemic and supply disruptions do not have long-term effects on inflation” since, otherwise, ” the inflationary expectations of firms and households could rise and put more pressure on inflation”.
