Two Federal Reserve officials argued on Thursday for modest, steady rate increases to bring inflation back to target. Their comments were the first from central bankers after Democrats won control of Congress, and they came as US stocks sold off.
Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin made a case for modest and steady interest rate increases on Thursday. Both want to tackle above-target inflation, according to Reuters.
Hammack prefers smaller, more frequent moves
Hammack expects monetary policy to need a restrictive stance to return inflation to 2% in a timely manner. She said she prefers reaching that stance through more frequent smaller adjustments when possible, which would be less disruptive to households, businesses and financial markets.
Gradual increases would also help prevent an inflationary mindset from taking hold among the public, Hammack said. Barkin, speaking in Charlotte, said inflation is too high and holding in rather than easing.
On the pace of future rate hikes, Barkin said, according to Reuters: "gradual makes sense".
Fed held rates last week
Last week, the Fed left its benchmark rate within the 3.75%-4.00% range. Hammack and Fed Governor Lisa Cook voted in favor of a rate hike. The Fed raised rates in September. Financial markets broadly expect another rate hike in December.
Fed Chairman Kevin Warsh has eschewed providing guidance about the future path of policy, Reuters reported.
Stocks slide as futures pare back hike bets
The Nasdaq was down 10% from its record close nearly a month ago and suffered its worst one-day drop in 19 months. The S&P 500 was down by 4% in afternoon trading.
Futures traders now put the probability of an increase at the December 8-9 meeting at around 70%, compared with more than 80% on Wednesday.
Friday's jobs report is the next test. A poll of economists sees hiring up by 65,000 in October after September's 29,000 gain, with the jobless rate holding at 4.2%.
Source: Reuters via Investing.com
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