Fed Raises Specter of Rate Hike Again
Fed president Neel Kashkari just said it and the possibility was also raised in the recent FOMC minutes.
Federal Reserve officials can’t seem to stop hinting that instead of lowering interest rates they might be forced to raise them if inflation isn’t tamed. This message was most recently delivered by Federal Reserve Bank of Minneapolis President Neel Kashkari at the Barclays-CEPR International Monetary Policy Forum in London yesterday.
“I don’t think anybody has totally taken rate increases off the table,” he said. “I think the odds of us raising rates are quite low, but I don’t want to take anything off the table.”
The possibility of higher rates was also raised in the minutes from the April 30-May 1 policy meeting of the Federal Open Market Committee, which reported that “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”
Federal Reserve Governor Michelle Bowman also said recently that it’s possible interest rates may have to move higher to control inflation.
“While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse,” she said in a speech to the Shadow Open Market Committee in New York. “Reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2 percent over the longer run.”
Bowman is a permanent voting member of the Federal Open Market Committee.
Kashkari is among the Fed officials that believe the Central Bank should wait for more evidence that inflation is cooling before cutting interest rates. We have time to assess how much downward pressure we are putting on demand,” he said. “I want to get all the data I can get before the next FOMC meeting before I reach any conclusions. But I can tell you this, it certainly won’t be more than two cuts.”
A new inflation report for April will be released this Friday, and economists surveyed by Bloomberg expect it will rise 0.2%, which would be the smallest advance so far this year.
But rent growth is also on the rise, complicating the picture. Zumper just reported that this month was the first time there has been monthly growth rates of over 1% in almost a year-and-a-half. “This notable rise in rent coupled with the current persisting inflation suggests that there will be even more pressure put on the CPI in the coming months and rate cuts by the Fed may be pushed back further than previously anticipated,” said Zumper CEO Anthemos Georgiades.