Recent statements among the Fed’s drafters have expressed support for a substantial hike in interest rates for the next hike. Cleveland Federal Reserve Bank president Loretta Mester on Tuesday advocated for an interest rate hike by half a point for the next session and eventually rates should rise above 2.5% to curb high inflation.
At the same time, he said, he did not believe the rate hike by the Fed was to slow demand for labor and curb supply thus pushing the economy into an ongoing recession.
In addition, New York Fed President John Williams also expressed support for a 50 basis point increase by stating "I think a 50 basis point increase is as sensible as what Chairman Powell said," Williams told reporters after a speech at an economic conference organized. by the German central bank in Eltville am Rhein, Germany.
The central bank last week raised its benchmark overnight lending rate by half a percentage point to a target range of between 0.75% and 1%, and has since marked a similar -sized increase likely to occur at the next two policy meetings in June and July.
The Fed is currently struggling to fight inflation which has soared to a 40 -year high. Coupled with the uncertainty sparked by the Russian-Ukrainian war conflict and the closure of factories in China due to the Covid-19 outbreak.
Williams expects the labor market to remain strong and generally healthy when inflation comes down, even as the unemployment rate rises.
Finally the Fed Williams expects that the Fed’s key inflation measure, the core personal consumption spending price index will fall from 5.2% to 4% by the end of the year before falling to around 2.5% in 2023. The U.S. government report. on Wednesday is expected to show consumer price inflation slowing slightly in April, which would be a sign that inflation has reached a peak.
