(Reuters) – The Federal Reserve may need to raise interest rates to a higher level and hold them there for longer in order to successfully moderate consumer demand and bring down high inflation given the amount of spare savings households still hold since the pandemic, Kansas City Fed President Esther George said on Tuesday.
“The dynamics of this excess saving and the distribution…is a key factor shaping the outlook for output, inflation and certainly for interest rates,” George said during an economics conference hosted by the Central Bank of Chile in Santiago. “Higher saving of course can lessen a precautionary pullback in consumption, and it could well take a higher interest rate for some time to convince households to hold on to their savings rather than spend it down, and that of course (is) adding to inflationary pressure.”
Source: Economy - investing.com
