Members of the Federal Reserve speaking across the country on Friday said that while there are signs inflation is starting to ease, they still think inflation is too high and more work needs to be done. done to depress price increases.
“Inflation remains far too high, despite some encouraging signs lately, and is therefore very concerning,” Federal Reserve Governor Lisa Cook said. said in a Friday speech in New Orleans.
Richmond Fed President Thomas Barkin made similar comments, noting that while inflation has likely passed its peak, there is still work to be done.
“We still have work to do. Inflation is too high and we will have to stay on the case until it returns sustainably to our 2% target,” Barkin said in a speech in North Carolina. .
In November, inflation measured by the the consumer price index increased by 7.1% Over the previous year, a slowdown from October and a two percentage point drop after the June reading showed prices up 9.1% from a year ago. The December reading on inflation is due out next Thursday, January 12.
Barkin warned that foregoing the rate hike too soon jeopardizes the Fed’s credibility and may require more aggressive action later.
“The experience of the 1970s showed that if you give up on inflation too soon, it comes back stronger, forcing the Fed to do even more, with even more damage,” Barkin said. “If you change the target before it’s met, as some have recently advocated, you put the Fed’s credibility at risk, increasing the sacrifice needed to control inflation.”
Kansas City Fed President Esther George, speaking at an event in Kansas City on Friday, noted the interest rate hike he’s been working on to slow demand and give chains time to catch up, especially for goods, but that more will have to be done. .
“I think it might take some time for inflation to come back down,” George said. “But I want the public to understand that the Fed intends to get there. We’re back to 2%. We’ll just have to see how the economy reacts to know whether to do more or less.”
“While recent inflation data has been encouraging, eliminating the imbalances that have driven prices up will be necessary to restore price stability,” she said.
George also added that it was important for balance sheet runoff to continue in order to minimize the Fed’s footprint and influence in financial markets. The Fed is currently shrinking the size of its balance sheet at a rate of $95 billion each month.
These comments came after the The December jobs report showed Growth slowed in the final wage month of the year, though the economy still added 223,000 jobs in December and more than 4.5 million in 2022.
Wages rose 4.6% year-on-year in December, from a 4.8% clip in November, though still above pre-pandemic levels and at a rate above the Fed’s 2% inflation target.
Atlanta Fed President Raphael Bostic said on Friday in an interview on CNBC The latest employment figures do not change his outlook for the economy and inflation.
“It doesn’t really change my outlook. I expected the economy to continually slow from the strong position it was in over the summer,” Bostic said. “It’s just a next step in that direction…it’s going gradually…because of this, we have to stay the course, inflation is too high, we have to reduce these imbalances.”
Looking ahead, Cook says the outlook for inflation will depend in part on disruptions to production and bottlenecks in supply chains, and how cost pressures play out.
“We need to be vigilant to ensure that the cost pressures and disruptions of the pandemic era do not have lasting effects on inflation,” Cook said. “If cost shocks and supply disruptions keep inflation high for long enough, household and business inflation expectations could rise – a development that could put additional upward pressure on inflation. ‘inflation.”
Like Cook, George worries that supply issues impacting the economy and inflation may take longer to resolve, and that the Fed may take them into account when setting monetary policy in the future. coming.
George also noted risks to the global outlook, including a recession in Europe and the continued impact of the pandemic in China. “Overall, the global outlook doesn’t suggest much of a buffer for the US economy if growth were to slow materially further here,” George said.
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