Fed speakers continue hawkish rhetoric as jobs data gives inflation extra bite
Investing.com — A slew of Federal Reserve members on Wednesday stressed the need for further rate hikes on concerns that a hot labor market could pave a sticker path for inflation. Federal Reserve Governor Christopher Waller said Wednesday the battle to cool inflation may prove to be a “long fight” that could require “interest rates higher for longer than some are currently expecting.”Fresh concerns about inflation have risen to the fore in the wake of last week’s stellar jobs report, showing 517,000 jobs created in January and a dip in the unemployment rate to 3.4% its lowest level since 1951. The strength of the labor market, which threatens to boost wages, has been a thorn in the side of the Fed’s battle against inflation. The Fed has raised rates about eight times since starting liftoff in March last year, a rate-hiking regime that included four super-sized 75 basis point rate hikes in a row. The hikes delivered so far aren’t yet restoring balance in the labor market, in which supply is struggling to keep up with demand, Federal Reserve Bank of Minneapolis President Neel Kashkari said Wednesday in a question-and-answer session at the Boston Economic Club, according to Bloomberg.Pointing to a lack of evidence that the rate hikes done so far are having much effect on the labor market, Kashkari said the Fed will “need to do more,” to restore balance in the labor market.But it isn’t just Fed members who have been rattled by the recent blowout jobs report. Markets are also repricing a more hawkish path for rate hikes. Traders are currently pricing in a further two hikes before a pause in June, according to Investing.com’s Fed Rate Monitor Tool. That would take the Fed funds rate to a range of 5% to 5.25%, which New York Federal Reserve President John Williams said was “still a reasonable view.”Williams, however, warned that “if financial conditions loosen too much, we would have to go higher on rates.”The remarks from the trio of Fed speakers echoed a similar stance from Fed chairman Jerome Powell, who day earlier said the process to bring down inflation could take a “significant period of time because the labor markets are extraordinarily strong.” More
