Economy · June 23, 2022

Support is growing among Fed officials for a further 0.75 percentage point rate hike

Support from top US Federal Reserve officials is building for another 0.75 percentage point rate hike at its next policy meeting in July as the central bank strengthens its commitment to address the price hike.

On Thursday, Michelle Bowman became the latest Fed governor to indicate upfront support for the move “based on current inflation readings,” adding that further rate hikes of “at least” half a percentage point would likely be needed over the next few years. subsequent meetings “as long as the incoming data supports them”.

“Depending on how the economy evolves, further increases in the target range for the federal funds rate may be needed,” he said in a comment delivered at an event hosted by the Massachusetts Bankers Association.

Bowman joined Fed Governor Christopher Waller, who on Saturday said the central bank was “all inclusive in restoring price stability” and said that if the data comes as expected, it would support another jumbo rate hike. next month.

Neel Kashkari, the dovish chairman of the Minneapolis Fed, also said such a move might be necessary, but added that it might be “prudent” to scale back rate hikes to half a point after July.

Growing support for another aggressive rate adjustment comes just days after the Fed implemented its first 0.75 percentage point rate hike since 1994 and signaled its support for a significantly tighter monetary tightening this year. Most officials now expect the federal funds rate to rise to around 3.75% by December, from the current target range of 1.50-1.75%.

Bowman said she expects the labor market to remain strong as the Fed hikes rates, noting historic demand for workers despite limited supply, but added that Fed shares “are not without risk.”

“But in my view, our number one responsibility is to reduce inflation,” he said. “Maintaining our commitment to restoring price stability is the best way to support a strong and sustainable labor market.”

Bowman’s comment echoed those of Fed Chairman Jay Powell as he tested in front of Congress this week. He told Senate lawmakers that a US recession was “certainly a possibility” as the central bank intensifies its efforts to counter the price surge, but added that failing to tame inflation “would hurt people we would like to help, people on the lower income spectrum ”.