US Federal Reserve officials are making hawkish remarks as the pace of the US inflation slowdown appears to be slower than market expectations.
According to the Wall Street Journal (WSJ) on the 16th (local time), Cleveland Federal Reserve Bank President Loretta Mester gave a speech in Sarasota, Florida, on the same day at the Federal Open Market Committee (FOMC) in February, saying, “The rate of interest rate hike by 0.5 percentage point will be maintained. I saw a compelling economic case.”
“There will be no change to my view that the benchmark rate will need to go above 5%,” he added.
At the FOMC meeting on the 1st, the Fed unanimously approved a 0.25 percentage point increase in the base rate to 4.50-4.75%. This year, Mester’s governor has no voting rights.
He said it was too early to specify the size of an appropriate rate hike at the Fed’s next meeting on the 21st and 22nd of next month. Still, he explained that interest rate hikes could exceed 0.25 percentage point if needed at a future meeting.
St. Louis Fed President James Bullard also said at the last meeting the same day that he would have supported a rate hike of 0.5 percentage point and that interest rates should be raised to close to 5.5% as soon as possible. President Bullard also has no voting rights this year.
“There’s not much advantage to delaying going to that level,” he told reporters. “My overall judgment would be inflation and the long run.”
The Fed has raised rates by 4.5 percentage points over the past eight meetings. This is the highest since the early 1980s.
Their remarks come as the pace of decline in US inflation has slowed.
The US Department of Labor announced on the 13th that the consumer price index (CPI) rose 6.4% in January, down slightly from the previous month’s 6.5% increase. Although it recorded a slowdown for seven consecutive months, the rate of increase exceeded market expectations.
The U.S. producer price index (PPI) for January, announced on the day, rose 6.0% year-on-year. This is higher than the market expectation of 5.4%. The rate of increase compared to the previous month, which showed a downward trend, also turned to an increase of 0.7%. It exceeded the market forecast (0.4%) and recorded the highest since June last year. Excluding volatile energy and food prices, core PPI also rose 0.5% MoM and 5.4% YoY, exceeding market expectations.
Concerns are growing that the Fed’s monetary tightening will be prolonged as inflation appears to be falling at a slower pace than expected.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.