Fed Officials Flag Possible Interest Rate Increase Despite Recent CPI Drop
Quick Summary
Several senior Federal Reserve officials have indicated that further interest rate hikes may be necessary, even as a report showed US consumer price index (CPI) inflation falling slightly in January. Core inflation fell to 5.6% from the previous month’s reading of 5.7%, while personal consumption expenditure (PCE) inflation was at 5.0%. Since March 2022, the FOMC has increased the fed funds rate at each meeting from 0–0.25% to 4.5–4.75%. Michelle Bowman of the Fed’s board of governors said inflation “continues to be much too high”. At the same time, Patrick Harker of the Philadelphia Federal Reserve estimated the federal funds rate could peak above 5%. Such comments indicate further policy adjustments may be needed despite recent dips in inflation and raise uncertainty over economic activity as we advance.
Full Story – Fed officials say rates may have to rise despite CPI fall – Central Banking
Some senior Federal Reserve officials said rates may need to continue rising, as data showed US consumer price index (CPI) inflation falling slightly in January.
Year-on-year CPI inflation was 6.4% in January, down by 0.1 percentage points from December’s figure. This was the seventh consecutive monthly decline in CPI inflation since its June 2022 reached 9.1% in June. Core inflation fell to 5.6% from the previous month’s reading of 5.7%.
The Federal Open Market Committee uses a different measure, the personal consumption expenditure (PCE) index, to judge if it has met its has a 2% inflation target. In December, PCE inflation was 5.0%, down from the November reading of 5.5%.
Since March 2022, the FOMC has raised the fed funds rate at every meeting from 0–0.25% to 4.5–4.75%.
Despite the slight fall in inflation, several senior officials said in recent speeches there was still a high level of economic uncertainty.
Inflation “continues to be much too high”, Michelle Bowman of the Fed’s board of governors said on February 13. “We are still far from achieving price stability, and I expect that it will be necessary to tighten monetary policy further to bring inflation down toward our goal. Doing so will likely lead to subdued growth in economic activity.”
On February 10, Federal Reserve Bank of Philadelphia president Patrick Harker said he expects the federal funds rate to peak above 5%. “How much above five? It’s going to depend…
