Fed Looks to Raise Rates Further to Combat Inflation
The Federal Reserve Bank of Atlanta President Raphael Bostic said Monday that the strong jobs report released in January could lead to the central bank increasing its key interest rate to a higher peak than what policymakers had previously expected.[0]
The news comes after the Federal Open Market Committee (FOMC) raised its policy interest rate to a top end of 4.75% last week as part of its stepped-up fight to reduce inflation to pre-pandemic levels of 2% or less.
Bostic told Bloomberg News in a phone interview that if a stronger-than-expected economy persists, “It’ll probably mean we have to do a little more work” which “would translate into us raising interest rates more than I have projected right now.”[1]
The US economy added 517,000 jobs in January and the unemployment rate edged down to a 53-year low of 3.4%, according to a report released by the Labor Department last week – more than double the 185,000 expected.[2]
The exceptionally strong report renewed talk that the Fed might raise its policy interest rate several more times as part of its fight to slay inflation.
Fed Chairman Jerome Powell, speaking to reporters on Feb. 1 after the conclusion of the Fed’s meeting, said officials expect to deliver a “couple” more interest-rate increases before putting their aggressive tightening campaign on hold.[3]
Meanwhile, Minneapolis Fed President Neel Kashkari said the strong labor-market report shows that the US central bank needs to keep raising interest rates.[3]
He reportedly said, “We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy.”[3]
Kashkari is a voting member this year of the rate-setting Federal Open Market Committee and he said he’s not changing his forecast for rates for now.[4]
Last week, the FOMC increased its benchmark rate by a quarter of a percent, making the range 4.5% to 4.75%.
Powell said the central bank is committed to further tightening policy until inflation meaningfully comes down, something that’ll require a more broad cooling of demand across the economy.[5]
0. “EXCLUSIVE: Federal Reserve Bank of Atlanta President Raphael Bostic Said January's … – Latest Tweet by” LatestLY, 6 Feb. 2023, https://www.latestly.com/socially/business/exclusive-federal-reserve-bank-of-atlanta-president-raphael-bostic-said-januarys-latest-tweet-by-bloomberg-4806896.html
1. “ICYMI – Fed's Bostic says interest rates may need to rise higher than he thought” ForexLive, 6 Feb. 2023, https://www.forexlive.com/centralbank/icymi-feds-bostic-says-interest-rates-may-need-to-rise-higher-than-he-thought-20230206/
2. “Minneapolis Fed President Kaskhari Says Aggressive Rate Hikes Needed To Curb Inflation” Benzinga, 7 Feb. 2023, https://www.benzinga.com/news/23/02/30759751/feds-kashkari-says-aggressive-rate-hikes-needed-to-curb-inflation-havent-seen-anything-yet-to-lower
3. “Fed’s Kashkari Says Strong Jobs Data Show Need for More Hikes” BNN Bloomberg, 7 Feb. 2023, https://www.bnnbloomberg.ca/fed-s-kashkari-says-strong-jobs-data-show-need-for-more-hikes-1.1880463
4. “Fed's Neel Kashkari says central bank has not made enough progress, keeping his rate outlook” CNBC, 7 Feb. 2023, https://www.cnbc.com/2023/02/07/feds-neel-kashkari-says-central-bank-has-not-made-enough-progress-keeping-his-rate-outlook.html
5. “Fed’s Daly Says December Dot Plot Still Good Signal for Rates” Yahoo! Voices, 3 Feb. 2023, https://www.yahoo.com/now/fed-daly-says-december-dot-194527418.html
