The Federal Reserve should raise and then maintain rate of interest at levels that will hamper economic growth. Because rising inflation is proving to be more enduring than expected, a central bank official said on Thursday.
Fed governor Lisa Cook said in remarks at the Peterson Institute for International Economics. Where she gave her first speech since joining the central bank’s board this May. The Fed will need to maintain rates at restrictive levels “until we are confident that inflation is strongly on the path toward our 2% goal.”
In a separate speech at the University of Kentucky, Fed Governor Christopher Waller stated. That while beginning to see results in their attempts to slow the economy and lower inflation. The Fed will likely continue to hike rates through the first quarter of 2019. He stated, “More needs to be done.”
What is the date of the next Fed meeting on interest rates?
The Federal Reserve hiked its benchmark interest rate during its meeting last month, bringing it to a range between 3% and 3.25%. Officials projected further rate rises totaling 1.25 percentage points this year. Officials may decide to increase interest rates by 0.75 percentage points at their meeting on November 1-2. And by 0.5 points at their meeting in December in order to reach those projections.
Before their meeting on November 1-2, Mr. Waller stated that he didn’t anticipate new economic data to be presented in the following weeks would materially change his or his colleagues’ outlooks.
These include the Labor Department’s Friday employment statistics and its Thursday inflation measurements.
At their meeting, he predicted that policymakers will have a “very thoughtful conversation” regarding the rate of tightening.
What will Fed do Next to Address inflation?
The U.S. Treasury, stock, and commodities markets, according to Mr. Waller, are operating in an orderly manner. He also mentioned certain policy tools the Fed may employ to ease financial system tension. If necessary, without necessarily modifying its interest-rate course.
Fighting inflation must be the main objective of monetary policy, he said.
One of the three new governors President Biden selected to join the Fed’s seven-member board this year is Ms. Cook. The Fed increased its benchmark rate by 0.75 percentage points at each of the three policy sessions she has attended this year.
Ms. Cook declared on Thursday. That she wholeheartedly supported those hikes in order to assist lower inflation and stop people and businesses from expecting inflation to endure. Which might lead to a self-fulfilling cycle of rising prices.
Even though cutting inflation will be painful, Ms. Cook, a former professor of economics. And international relations at Michigan State University, Warned that if price stability is not restore now, doing so will be far more difficult and painful in the future. We must do all in our power to stop an inflationary attitude from taking root.
According to Ms. Cook, Recent inflation data indicate that price pressures are “stubbornly persistent”. And that the prices of some items that rose significantly last year have decreased more slowly than expected.
She stated, “I have increased my estimate of the continuance of rising inflation. “I am concerned about the delay between indications of diminishing price pressures and actual inflation declining from its very high levels.”
How US Economy is Affected?
The U.S. economy has been affected by a number of interest rate increases, and more are anticipated in the future. By lowering the amount of investment, spending, and hiring in the U.S. economy. Officials hope to lower inflation from nearly 40-year high levels.
According to seasonally adjusted data, the number of new applications for unemployment benefits increased last week to 219,000 from 190,000, the Labor Department reported on Thursday. Although it was the highest level since late August. It was still very low compared to where they were in 2019 before to the epidemic.
Mr. Waller spent a significant amount of his time on Thursday discussing the downturn in the US housing market. Which is being cause by mortgage rates that have risen to a 16-year high. The danger of a “substantial correction” in U.S. housing values.
According to Mr. Waller, was present, but he was less concerned about a repeat of the 2008 catastrophe due to tighter mortgage-underwriting guidelines.
Because of how those expenses are calculated, a decrease in housing costs may take several months to reflect in larger indices of price inflation.
However, Mr. Waller stated that he believed that the impact of the Fed’s rate hikes so far this year may cause inflation, excluding that for food, energy, and shelter, to slow.