Thursday, June 1, 2023
HomeEconomyFed's Cook backs 'pre-emptive' rate hikes to tackle 'stubborn' high inflation

Fed's Cook backs 'pre-emptive' rate hikes to tackle 'stubborn' high inflation

Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – On Thursday, new Fed Governor Lisa Cook was blunt about the central bank’s concerns about continuing to raise interest rates The broad consensus came as other policymakers joined in reiterating their view that monetary tightening would not ease.

U.S. inflation “remains unacceptably high, with data from the past few months showing that inflationary pressures remain widespread” and continued interest rate hikes are needed to ensure inflation begins to decline, Cook said in Her report said she had spoken publicly about monetary policy for the first time since joining the Fed’s Washington board.

Speaking at the Peterson Institute for International Economics in Washington, Cook said the recent decline in job openings, slowing rent growth and other data suggesting price pressures may be easing are not enough to conclude that the Fed has A turnaround in the fight against rising prices.

Inflation “has to come down, and we’re going to hold on until the job is done,” Cook said, repeating the Fed’s signature phrase to convey that it raised its target policy rate to a restrictive level and lowered it slowing down the economy, even at the risk of slowing economic growth and rising unemployment.

Her comments make Cook the first black woman on the Fed board, who holds a Ph.D. in economics

Fed Governor Philip Jefferson earlier this week In his first speech at the time, he said he was also “resolute” in controlling inflation.


Fed officials in recent days have echoed recent signs that inflation may be easing, stress in financial markets and the pressure their monetary policy tightening is weighing on economic conditions in other countries — but nothing There are signs that they are about to change their plans.

As of the September 20- policy meeting, policy makers said they would implement it for the fourth time in a row A three-quarter percentage point rate hike at the upcoming meeting on Nov. 1-2 followed by further hikes.

“Inflation is high right now, and we need tighter monetary policy settings,” Chicago Fed President Charles Evans told the Illinois Chamber of Commerce on Thursday. He said the U.S. central bank’s benchmark overnight rate would rise to the 4.50%-4.75% range based on forecasts released by policymakers last month. Sometime next year “given how fast we’re raising rates, it’s likely to be spring.”

Minneapolis Fed President Neil Kashkari in another Thursday Speaking at the event, he said there was “little evidence” that inflation had even peaked at this point, making a shift in the Fed’s plans unlikely.

“We need to be vigilant about risks that could destabilize the entire U.S. economy,” Kashkari said at Bremer Financial’s fall leadership conference. “But for me, the bar to really change the policy stance is very high.”

‘Some pain’

The Fed is analysing data that has already begun, at least to some extent The upswing will work in its favor, especially with the recent drop in job openings, which could point to a more accommodative labor market and less pressure on wages.

But top inflation remains at a four-year high and the Fed’s most closely watched gauge remains more than three times above its 2% target.

“The breadth of inflationary pressures suggests that the broader economy is very tight,” Cook said in his speech on Thursday.

As such, Cook said she “fully supports” the 75 basis point hikes she approved at the three policy meetings she attended as a Fed governor, so so far, Agreed to “preload” monetary tightening to accelerate its impact, and argued that policy changes need to be rooted in an actual decline in inflation, rather than forecasting it would do so.

The Fed’s “pre-emptive approach is appropriate. While there will be some pain in lowering inflation, failure to restore price stability will make it more difficult and painful to restore it in the future,” Cook said. “In the current situation, where inflation forecast risks are skewed to the upside, I think policy judgments must be based on whether and when we see inflation actually falling in the data, not just in the forecast.”

, she said that while it would be appropriate to slow the pace of rate hikes “at some point”, she did not signal her preference for the Fed’s policy decision next month.

“The policy path should depend on how quickly we make progress towards our inflation target,” Cook said.

Fed officials may learn further work to be done next week when the Labor Department releases its September CPI report to assess inflation.



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