US central bank officials said on Monday the Federal Reserve will need to hike interest rates further to rein in runaway inflation as the end of its current monetary policy tightening cycle nears.
From March 2022, interest rates were raised by 5 percentage points to contain the highest US inflation in four decades.
Last month, policymakers skipped interest rate hikes to take stock of the evolving effects of previous increases in borrowing costs.
San Francisco Fed President Mary Daly said during an event at the Brookings Institution, “We will likely need a few more rate hikes during this year to really get inflation back to the US central bank’s 2% target.” ” Voices for the most common view among her rate-setting peers at the Fed.
He said the risk of doing too little is still higher than going too far on raising rates, with the two sides coming into better balance as the Fed nears the “last part” of its hiking cycle.
“We can do less because we need to do less; we can do just that; we can do more. The data will tell us.”
Fed policymakers are widely expected to hike rates at their meeting later this month, a move that would bring the policy rate into a range of 5.25%-5.50%.
It is less clear whether they will raise rates again at the September meeting, wait until November, or simply hold off and allow inflation to ease over time.
Fed Chairman Jerome Powell has said he cannot rule out further rate hikes to combat extremely high inflation, which has seen the central bank’s favorite gauge, the personal consumption expenditure index, fall from a peak of 7% last year in May. Has become 3.8%. Still nearly double the Fed’s target.
“We still have some work to do,” the Fed’s supervisory vice-chairman Michael Barr said on a separate event on Monday. “I’ll just say for myself, I think we’re close.”
– With additional input from Reuters