US central bankers stressed the need to keep raising interest rates and St. Louis Fed chief James Bullard said officials should act quickly and lift their policy benchmark to a 3.75% to 4% range by year end.
“I like the front-loading. I like the idea that you get the rate increases in earlier rather than later,” he told CNBC Thursday in Jackson Hole, Wyo. “You show you are serious about inflation fighting and you want to get up to the level that will put downward pressure on inflation. We are at 2.33% right now. That is not high enough,” he said, referring to the current effective level of the benchmark federal funds rate.
Other officials speaking at their policy retreat in Wyoming reserved judgment on how big they should go at next month’ meeting, but agreed rates need to rise.
Kansas City Fed President Esther George, who hosts the annual forum, said the Fed hasn’t yet raised them to levels that weigh on the economy and may have to take them above 4% for a time.
“It’s very important that we are clear in our communication about the destination we are headed,” she told Michael McKee and Kathleen Hays in an interview with Bloomberg Television. “We have to get interest rates higher to slow down demand and bring inflation back to our target,” she said.
Both officials vote on monetary policy this year and their comments helped set the stage for a busy two days of Fed speakers, who will be headlined Friday by Chair Jerome Powell with a speech likely to restate his resolve to keep tightening monetary policy to fight inflation.
The US central bank is raising interest rates rapidly to curb the hottest price pressures in 40 years. US consumer prices rose 8.5% in the 12 months through July, according to Labor Department data. The Fed aims at a different gauge produced by the Commerce Department, called the personal consumption expenditures price index, which rose 6.8% in the year through June.
Asked how high the Fed should push borrowing costs, George said there was “more room to go” and pushed back against bets in financial markets the central bank would begin cutting rates next year.
“I think we will have to hold -- it could be over 4%. I don’t think that’s out of the question,” she said. “You won’t know that, I think, until you begin to watch the data signs.”
Bullard said he’d deliberately not talked much about the outlook for rates in 2023 because it’s such a “volatile” environment, but cautioned that markets were underestimating the risk that price pressures fail to ease, and that the Fed has to push harder on the policy brake than investors expect.