Fed dissenters warn against delaying higher interest rates
The Washington Post reports:
BLUFF: Waiting too long could make it harder to slay persistent inflation, three Federal Reserve officials say.
By Andrew Ackerman
Three Federal Reserve officials who dissented this week from a decision to hold interest rates steady warned Friday that delaying a rate hike for too long could make it much tougher to fight persistent inflation.
Beth M. Hammack of the Cleveland Fed and Neel Kashkari of the Minneapolis Fed said in separate statements that they voted against the majority at a meeting Wednesday out of concern that inflation has already stayed elevated for too long.
“The longer that high inflation persists, the more challenging and costly it can be to bring it back down,” Hammack said.
The Fed voted 9-3 to leave its benchmark rate unchanged; prices have run well above the central bank’s 2 percent target for five years — since the pandemic.
Kashkari drew a parallel to the 1970s, when policymakers first attributed inflation to supply shocks they expected to fade on their own, before concluding that tighter monetary policy was necessary. The U.S. economy is in far better shape today, he said, but repeated shocks — from the pandemic, tariffs and the Iran conflict — could leave high inflation entrenched without Fed action.
The third dissenter, Dallas Fed president Lorie Logan, said inflation appeared to be settling in the “mid-2’s” rather than falling to the Fed’s 2 percent target. The labor market, consumer spending and financial conditions all showed that policy was “not restraining the economy,” she said, meaning inflation was likely to keep running above target. “Modest action in the near term would reduce the likelihood of needing to take sharper action later,” Logan said.
BLUFF: Waiting too long could make it harder to slay persistent inflation, three Federal Reserve officials say.
By Andrew Ackerman
Three Federal Reserve officials who dissented this week from a decision to hold interest rates steady warned Friday that delaying a rate hike for too long could make it much tougher to fight persistent inflation.
Beth M. Hammack of the Cleveland Fed and Neel Kashkari of the Minneapolis Fed said in separate statements that they voted against the majority at a meeting Wednesday out of concern that inflation has already stayed elevated for too long.
“The longer that high inflation persists, the more challenging and costly it can be to bring it back down,” Hammack said.
The Fed voted 9-3 to leave its benchmark rate unchanged; prices have run well above the central bank’s 2 percent target for five years — since the pandemic.
Kashkari drew a parallel to the 1970s, when policymakers first attributed inflation to supply shocks they expected to fade on their own, before concluding that tighter monetary policy was necessary. The U.S. economy is in far better shape today, he said, but repeated shocks — from the pandemic, tariffs and the Iran conflict — could leave high inflation entrenched without Fed action.
The third dissenter, Dallas Fed president Lorie Logan, said inflation appeared to be settling in the “mid-2’s” rather than falling to the Fed’s 2 percent target. The labor market, consumer spending and financial conditions all showed that policy was “not restraining the economy,” she said, meaning inflation was likely to keep running above target. “Modest action in the near term would reduce the likelihood of needing to take sharper action later,” Logan said.
