Fed would be open to more than three rate hikes this year if inflation worsens

Philadelphia Fed President Patrick Harker said he would currently support three interest rate hikes this year, starting in March, and would be open to more if inflation worsens.

Consumer prices in the United States rose in December, with the largest annual increase in inflation in almost four decades, which has consolidated expectations that the Federal Reserve will start raising interest rates as early as March.

In an interview with the Financial Times, Harker said that the central bank has few tools to combat the supply chain problems that fuel inflation, but that it should act to curb some of the demand.

Harker’s remarks echoed the Fed’s turn toward fighting inflation, a shift that was cemented at the December meeting, where it signaled three rate hikes in 2022.

Earlier this week, central bank Chairman Jerome Powell reiterated the stance, saying tighter monetary policy is needed to ensure high inflation does not “root”.

Similar comments were also made by Atlanta Fed President Raphael Bostic, who suggested the Fed will have to raise interest rates at least three times this year, starting as early as March.

Both Bostic and Harker are this year non-voting members of the Fed’s interest rate committee.

control inflation

Controlling inflation, which has soared to nearly a 40-year high, is the “most important task” facing the Fed right now, Governor Lael Brainard said in remarks prepared for a Senate hearing. about his candidacy for the vice presidency of the US central bank.

“We are witnessing the biggest rebound in growth and the biggest reduction in unemployment of any recovery in the last five decades,” he said in a statement to be delivered Thursday before the Senate Banking Committee.

“But inflation is too high and workers across the country are concerned about the extent of their paychecks. Our monetary policy is focused on bringing inflation back to 2%, while maintaining a recovery that includes everyone. This is our most important task,” he emphasized.

Brainard’s testimony in a session that could mark the start of a broader and potentially bitter partisan contest over the makeup of the Fed’s seven-member board.

Only four of those positions are filled at the moment, and Biden’s pending appointments, including that of a second vice president to oversee financial regulation, could boost what he and his Democratic supporters believe should be a greater role for the Fed in climate issues and a harder hand with Wall Street.

Brainard, a Democrat first appointed to the Fed in 2014 by then-President Barack Obama and confirmed at the time by a 61-31 vote, would be a prominent player in that effort.

As Fed governor she was a frequent dissenting vote against moves under former President Donald Trump and under Fed Chairman Jerome Powell to loosen supervision of the biggest banks.

He has also demanded that the Fed require financial firms to set aside more capital and worried that Fed officials were behind European central bankers in understanding how climate change could affect the macroeconomy.