US Fed officials flag inflation risks, signal possible gradual rate hikes
Philadelphia Fed President Paulson says gradual rate hikes are appropriate, with the path depending on economic trends. Chicago Fed President Goolsbee warns that inflation data is concerning, especially in services, and that stubborn inflation expectations are a major worry.
Philadelphia Federal Reserve Bank President Susan Paulson has said that further gradual interest rate hikes by the US central bank are appropriate, with the specific policy path depending on economic trends. She said the Fed will closely monitor economic data and, if the inflation situation worsens, it will take more aggressive action.
Paulson noted that the underlying inflation rate is hovering between 2.5 and 3 per cent, and that the Fed still has more work to do in bringing down inflation. She argued that gradual rate increases would give the economy time to adjust to higher borrowing costs and allow Fed officials room to assess the impact of policy changes.
She added that monetary policy needs to remain somewhat restrictive in order to bring the inflation rate back to the Fed's 2 per cent target.
Separately, Chicago Federal Reserve Bank President Austan Goolsbee said the inflation data is worrying, particularly because inflation in the services sector has not yet receded. He said the US faces a genuine inflation problem that must be addressed, and that stubborn inflation expectations would be a major concern.