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Washington (AFP) – An official at the US Federal Reserve announced on Monday that it expects a high inflation rate during the first half of 2022 at least, and therefore supports raising interest rates in March, even if the rate depends on the data.
“I am in favor of raising the federal funds rate at our next meeting in March,” said Michael Bowman, a member of the Fed’s board of governors, stressing that if the economy develops as you expect, “a further rate hike would be appropriate in the coming months.”
It did not specify the extent of the increase it expects at this stage.
“I will monitor the data closely to judge the appropriate size of the increase,” she said in a speech to a banking conference.
And US inflation is at its highest rate in four decades, which has damaged the popularity of President Joe Biden and dealt a blow to families and businesses in the world’s largest economies.
The markets are awaiting the first increase in interest rates during the meeting of the Monetary Policy Committee of the Bank on March 15-16. Some economists expect an increase of 50 percentage points, twice the normal increase.
Bowman expected “the continuation of a high rate of inflation during the first half of 2022 at the very least.”
“We may see indications of a decline in inflation in the second half of the year, but there are significant risks of continuing high inflation,” she said.
She said labor market conditions are “currently in line” with the Fed’s goal of securing full employment. The unemployment rate in January was 4 percent, and employers are facing a problem related to a large labor shortage.
Another measure that would help slow inflation would be to adjust the Federal Reserve’s balance sheet. The Central Bank has been seeking since November to reduce its monthly purchases of stocks and bonds, aimed at supporting the economy in the face of the repercussions of Covid-19.
Purchases will be reduced to zero by March.
“This will remove another source of unnecessary stimulus for the economy,” Bowman said, adding that “in the coming months, we have to take the next step, which is to start shrinking the Fed’s balance sheet by stopping reinvesting in maturing bonds that are mainly in the portfolio.”
© 2022 AFP