By Michael S. Derby and Howard Schneider
Feb. 16 (Reuters) – Two senior Federal Reserve officials said on Thursday that continuing to raise interest rates was essential to bring inflation back to desired levels.
The Fed “has come a long way in moving its policy from ultra-easy to tough, but I think more needs to be done,” Cleveland Fed President Loretta Mester said in a speech.
“Incoming data hasn’t changed my view that we will need to get the fed funds rate above 5% and hold it there for some time” to try to get inflation back on target 2%, he said.
When the Fed met earlier this month to deliberate on rate policy, it slowed the pace of what had been a barrage of hikes and raised its overnight rate target by a quarter. percentage point, between 4.5% and 4.75%.
The Fed has signaled that more rate hikes are coming to help bring inflation levels that are too high to the 2% target.
But after that meeting, data showed surprisingly strong levels of job creation in January, raising questions about whether the labor market has slowed as much as Fed officials believe it needs to.
Meanwhile, on Tuesday, January’s consumer price index did not decline as much as economists had expected, keeping pressure on the central bank to raise borrowing costs further.
INFLATION TESTS
Some other Fed officials have said in recent comments that they accept more limited rate hikes, but others have said the Fed may have to raise rates further and hold them longer if inflation does not kick in. not.
In documents for a presentation on Thursday, St. Louis Fed Chief James Bullard did not offer an opinion on the next step for monetary policy, but said the central bank’s action was important to ensure that pressures on inflation rates continue to come down.
“Inflation is still too high, but it has eased,” Bullard said, adding that “continued policy rate increases can help block a disinflationary trend through 2023, even with continued growth and strong labor markets,” he added. .
Bullard Is Not Voting on the Fed’s Monetary Policy Committee This Year (Reporting by Michael S. Derby. Editing in Spanish by Marion Giraldo)