(Washington) Several US central bank officials said Tuesday that a rapid rate hike in the coming months is necessary in the face of the threat posed by high inflation, even if, according to some of them, to see unemployment temporarily back up a bit.
Updated yesterday at 3:24 p.m.
“I expect that [la Fed] move quickly to bring key rates back to more normal levels this year,” New York Fed President John Williams told a Bundesbank conference in Germany. and the National Association for Business Economics (NABE).
According to him, the Fed has “the right tools to achieve [ses] Goals “.
The rates are currently situated in a range between 0.75% and 1%. The Fed had raised them by a quarter of a percentage point in mid-March, then by an additional half a percentage point on May 4, the first turn of the screw of this magnitude since 2000.
Other increases of half a percentage point could occur during the next two meetings, mid-June and end-July.
“Now is a good time to raise rates because the economy can handle it,” said Christopher Waller, one of the institution’s governors.
“The idea is that we are going to bring down this inflation, […] we know the damage that happens if we don’t,” he stressed, adding that it can be done “without having a significant impact on employment or unemployment.”
“Tall Challenge”
Cleveland Fed President Loretta Mester, for her part, warned that a rise in unemployment “for a few months” is possible, as well as another quarter of a decline in gross domestic product (GDP).
“There are a lot of things moving at the same time, but our intention is to control inflation and have a sustainable expansion as a result,” she said, however, in an interview with the Yahoo Finance channel.
She too says she is “comfortable” with interest rate hikes of 0.50% at the next two Fed meetings: “we have to get inflation under control, which means raising interest rates” .
“There is no doubt that the challenge for the Fed is daunting. I think things will be strewn with obstacles, ”she further warned.
John Williams, for his part, does not anticipate a rebound in unemployment. It expects 4% underlying PCE inflation for 2022, i.e. without taking into account food and energy prices.
The PCE inflation index is the one favored by the Fed. It had increased, in March, by 5.2% over one year without food and energy, the prices of which have soared since the start of the war in Ukraine, and by 6.6% taking into account the set of prices.
Another measure of inflation, the CPI, for April will be released on Wednesday.
Joe Biden hammered Tuesday that tackling the sharp rise in prices was his “biggest national priority”.