(Philadelphia) An official of the American central bank (Fed) estimated on Thursday that rates will have to continue to be raised, and remain at a high level, in order to ensure that inflation slows down durably in the United States.
“I foresee that additional tightening may be necessary” to reach a level restrictive enough to effectively slow economic activity and ensure that high inflation gets in the way, said the president of the antenna regional Fed in Philadelphia, Patrick Harker.
Then, “once we reach this point, which should happen this year, I expect that we will keep rates at this level and let monetary policy do its job”, detailed this official, who has in 2023 rotating voting rights at meetings of the FOMC, the decision-making body of the Fed.
Inflation in the United States slowed to 5% year on year in March, the lowest in almost two years, according to the CPI index published last week.
A figure still too high compared to the Fed’s 2% target. However, the institution favors another measure, the PCE index, whose figures for March will be published on April 28.
“Recent data show that inflation continues to decline, but slowly,” noted Patrick Harker again during this speech to the Wharton School at the University of Pennsylvania in Philadelphia.
This powerful Fed official also judged that the recent tensions in the banking sector should lead to “tighter credit conditions for households and businesses, which could slow economic activity and hiring”, and thereby helping to calm inflation.
“But the extent is not yet clear. What is clear is that the Fed remains fully committed to its 2% inflation target,” he said.
Fed Chairman Jerome Powell indicated after the last meeting on March 22 that a tightening of credit conditions was likely to have the same effect as a rate hike.
The next Fed meeting will be May 2-3. Rates are currently in the 4.75-5.00% range, the highest since 2007, and most market participants are pricing in another quarter-point hike, according to CME’s valuation. Group.