Two Fed hawks say more hikes in…

Bloomberg — St. Louis Federal Reserve Bank President James Bullard on Monday endorsed two more rate hikes in 2023 and his Minneapolis colleague Neel Kashkari said that if the central bank pauses next month, that should signal monetary tightening is far from over.

His comments follow an apparent signal from the bank’s president, Jerome Powell, who said last week that Fed officials may adjourn their June 13-14 meeting to assess the impact of previous hikes on price pressures amid tensions in the banking sector.

“I think we will have to raise the official interest rate further to put enough downward pressure on inflation for it to return to its target in time.”Pollard told the American Gas Association Financial Forum in Fort Lauderdale, Florida.

“I’m contemplating a couple more moves this year (I don’t know exactly when), but I’m often motivated sooner rather than later,” he said.

Investors currently see odds of about 22% that officials will raise 25 basis points next month, based on interest rate futures prices.

Bullard is a closely watched hawk and was an early advocate of aggressive increases before the central bank started raising borrowing costs last year. In 2023, you will not vote on the Federal Open Market Committee (FOMC), which is responsible for setting policies.

The authorities have raised interest rates by 5 percentage points in the past 14 months to curb inflation, which is doubling its 2% target.

With its benchmark rate now in its target range of 5% to 5.25% after a quarter-point rise earlier in the month, Powell said Friday that policymakers can afford to watch the data and change views.

Despite slowing growth and low inflation, the economy remains strong and prices are not declining as quickly as expected.

On the other hand, credit conditions have been tightened after the failure of four US regional banks in recent months, which may help the Fed’s mission by slowing growth.

But investors remain wary of the sector, and if further price increases cause additional banking stress, widespread panic could be unleashed, tipping the economy toward recession.

Kashkari, who has been another hawkish political voice and votes on the FOMC this year, said he has not yet seen evidence that banking sector tensions are helping to cool prices.

But they might And so he does not mind not raising interest rates in June, as long as officials leave the door open for a hike if price pressures do not ease as expected.

I think the decision to raise or skip interest rates in June is very close now. The important thing for me is not to suggest that we are done, Kashkari said in an interview on CNBC.

“If we get past the June rally, it doesn’t mean we’re done with the tightening cycle, it just means we’re getting more information. Will we then start climbing again in July, probably?”He said.

Read more at Bloomberg.com