“It’s very important that we are clear in our communication about the destination we are headed,” she told Michael McKee and Kathleen Hays in an interview with Bloomberg Television in Jackson Hole, Wyoming, where she hosts the Fed’s annual policy retreat.
“We have to get interest rates higher to slow down demand and bring inflation back to our target,” said George, who votes on monetary policy this year. The interview was taped on Wednesday.
Asked how high the Fed should raise rates, George said there was “more room to go” and pushed back against bets in financial markets the central bank would begin cutting rates next year.
“I think we will have to hold — it could be over 4%. I don’t think that’s out of the question,” she said. “You won’t know that, I think, until you begin to watch the data signs.”
Chair Jerome Powell, headlining the prestigious symposium with a speech Friday morning, is expected to restate his resolve to keep tightening monetary policy to fight inflation.
The US central bank is raising interest rates rapidly to curb the hottest price pressures in 40 years.
Fed officials hiked by 75 basis points at each of their last two meetings and have said the same again could be on the table when they gather next month, depending on the data. They get fresh reads on consumer prices and employment between now and then.
George saw some signs of demand cooling but “certainly you’re not seeing it fully in the inflation data yet. It’s still very broad-based, and I think tells us there is more work to do.”
US consumer prices rose 8.5% in the 12 months through July. The Fed aims at a different gauge, called the personal consumption expenditures price index, which rose 6.8% in the year through June.
“We want financial conditions to tighten along with the direction we are moving around policy,” she said.
In a separate interview with the Wall Street Journal, Atlanta Fed President Raphael Bostic said that he had not yet decided whether to back a 50 or 75 basis-point increase at the Sept. 20-21 gathering of the policy-setting Federal Open Market Committee.
“At this point, I’d toss a coin between the two,” he told the Journal in an interview on Wednesday that was published Thursday. “We all, as policy makers, understand that inflation is a big problem and is a challenge that we’re going to do all that we can to handle.”
(Updates with Bostic comments to Wall Street Journal in final paragraph.)
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Source: Economy - investing.com
