Three US Federal Reserve Bank presidents reiterated on the 30th the need to curb inflation while paying attention to the impact of the failure of the Silicon Valley Bank (SVB).
The governors’ comments echo last week’s remarks by Federal Reserve Chairman Jerome Powell, who said officials were undaunted by their responsibility to restore price stability amid heightened tensions in the banking sector.
“Inflation is still too high, and recent data support my view that there is still work to be done to bring inflation down to the 2% target while keeping prices stable,” said Boston Fed President Collins. said at a conference hosted by the National Association of Business Economists (NABE).
Boston Fed President Collins
Photographer: Ting Shen/Bloomberg
Collins then said he believes a 0.25 percentage point band is appropriate for the pace needed to raise the policy rate to a sufficiently restrained level. He will not have a vote at this year’s Federal Open Market Committee (FOMC) meeting.
At last week’s Federal Open Market Committee (FOMC) meeting, Fed officials decided to raise key policy rates by 0.25 percentage points. The target range for the federal funds rate, which was near zero in March last year, is now 4.75% to 5%.
The economic and interest rate forecasts of 18 FOMC participants announced at the same time put the policy rate at about 5.1% at the end of 2023, suggesting one more rate hike of 0.25 percentage points.
February’s Personal Consumption Expenditures (PCE) price index, the Fed’s primary inflation indicator, is expected to continue to be more than double the Fed’s inflation target.
Minneapolis Fed President Neel Kashkari said it was too early to judge the economic impact of the turmoil in the banking sector, but said the Fed also needed to focus on curbing inflation. The president will have voting rights on the FOMC this year.
Kashkari, who was involved in the government’s response to the 2008-09 financial crisis, said stress in the banking sector tends to last longer than officials originally expected. But inflation is too high, and the services sector, excluding housing, has yet to slow down despite aggressive interest rate hikes, he said.
“The service sector of the economy is not slowing yet. We want wages to rise, but wage growth is still outpacing our 2% inflation target,” said Towne in St. Paul, Minnesota. Speaking at a hall meeting. “It speaks to the work that still needs to be done to rebalance the services side of the economy,” he said.
Statement by Governor Kashkari
Source: Bloomberg
Richmond Fed President Barkin said at an event in Richmond, Va., that the Fed is ready to continue its fight against inflation. However, he said he was not sure about the next rate move given the uncertainty in the banking sector and the wider economic impact.
“If inflation persists, we can respond with more interest rate hikes. Just a few weeks ago, there was one voice in favor of a 50 basis point (bp = 0.01%) rate hike. I went up in the department,” he said.
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