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FILE PHOTO: Federal Reserve Building in Washington, DC
Por Howard Schneider
WASHINGTON, Feb 14 (Archyde.com) – Federal Reserve officials continued to wrangle over how aggressively they should start the next interest rate hikes at their March meeting, with a final inflation reading coming just before that session. of two days, which took on potentially exaggerated importance.
St. Louis Fed President James Bullard on Monday reiterated calls for a faster pace of rate hikes, saying four strong inflation reports in a row warrant more aggressive action and that the bank The central bank needs to “ratify” the market’s expectations about its next moves.
Bullard, who helped shape those expectations by calling for a 50 basis point hike at the March meeting last week, said on CNBC that the Fed’s “credibility is at stake” in its bid to reduce inflation. from the current 40-year high of more than 7%.
“It was really the months of October, November, December and January that challenged any notion that this inflation was going to moderate naturally in a reasonable timeframe without action by the Fed,” Bullard said.
He again asked for a full percentage point hike for July 1, which implies at least a half percentage point hike in one of the three meetings until then, instead of the quarter point hikes that the Fed has used in recent years.
As he spoke, bond yields rose again and recent market volatility continued. The 10-year Treasury debt was again above 2%, and the Dow Jones Industrial Average fell more than 200 points at the end of the morning
Other Fed officials have been less willing to commit to a half-point hike, or even worried it could cause problems.
In an interview on SiriusXM radio, Richmond Fed President Thomas Barkin said it was “timely” to start raising rates, but said details would depend on how inflation moves in future reports.
“Will it settle back to levels more like we’ve seen in the last 30 years, or will it not settle?” Barkin wondered. “Depending on the response you could adjust your pace or your timing.”
Kansas City Fed President Esther George said in a Wall Street Journal interview that she wanted a “systematic” plan to tighten monetary policy, but was not convinced she had to start with a 50-point hike. basics.
“It’s always preferable to go gradually,” George said. “Given the situation we find ourselves in, the uncertainties around the effects of the pandemic and other things, I would be hard-pressed to say that we have to get to neutral very quickly,” a goal that would dictate higher and more frequent rate increases.
On Sunday, San Francisco Fed chief Mary Daly said if the Fed is too “harsh and aggressive” it could “have a destabilizing effect on the very growth and price stability that we’re trying to achieve.”
Daly told CBS’s “Face the Nation” that after raising rates in March, the Fed may even consider pausing its next meeting to assess the economy, which contrasts with the constant rate hikes Bullard sees as appropriate at meetings. of March, May and June.
With the Fed promising what it calls a “loose” approach to monetary policy after so many pandemic-era surprises, the final decision may hinge on the details of the final report on consumer inflation, due March 10. , which the central bank will receive before its meeting on the 15th and 16th of the month.
That report will show whether, as some central bankers say they expect, monthly price change is slowing, something several have said would allow them to tighten monetary policy at a slower pace.
(Reporting by Howard Schneider, Editing in Spanish by Manuel Farías)