Bank policymakers opted last month to forgo a new increase to give themselves time to assess the still-unfolding effects of earlier borrowing cost hikes, though most also targeted at least two more increases through the end of 2023.
“We’ll probably need a couple more rate hikes this year to get inflation back to the 2% target set by the Federal Reserve on a sustainable basis,” San Francisco-based Fed President Mary Daly said. during an act at the Brookings Institution, giving voice to the most common opinion among his colleagues.
He added that while the risks of doing too little remain greater than those of going too far on rate hikes, the two sides are balancing better as the Fed approaches “the last leg” of its rate hike cycle.
He also signaled his full support for the June policy decision, along with a slow down approach that allows for a more “extreme” reliance on data. “We may end up doing less because we need to do less; we may end up doing just that; we may end up doing more. The data will tell us,” he said.
Fed policymakers are expected to raise rates at their meeting this month, which would put the official interest rate between 5.25% and 5.50%. What is not so clear is whether they will do it again at the September meeting, wait until November or just wait and let inflation smooth over time.
Fed Chairman Jerome Powell has said he cannot rule out back-to-back rate hikes to tackle stubbornly high inflation, which the central bank’s preferred gauge of personal consumption expenditures has fallen from a record low. from 7% last year to 3.8% in May, still almost double the entity’s target.
“We still have a bit of work to do,” Fed Vice President for Supervision Michael Barr said at a separate event. “On a personal note, I’ll just say that I think we’re close,” he declared.
At another event on Monday, Atlanta Fed President Raphael Bostic reiterated his view that the Fed can be “patient” with rates and allow tightening to bring inflation down without further action by the central bank. .
However, within the Fed there is still a camp that thinks just the opposite.
“In June I was in favor of raising rates a little more and, given the current situation, I still am,” Cleveland Fed President Loretta Mester said at an event held by the University of California at San Diego. Still, she asserted, “we are closer to the end of our hardening phase than the beginning.”