January 29, 2023
US interest rates should rise above 4%, Fed official says

US interest rates should rise above 4%, Fed official says

Federal Reserve Kansas City District President Esther George (Fed, US Central bank) said that she does not know what the terminal interest rate is for the current monetary crisis cycle in the United States. The base rate would need to rise above 4% to contain US inflation. These comments were made during an interview given to Bloomberg TVHeld on Wednesday (24) and released this Thursday.

Respecting the Fed’s mandate to “raise rates to reduce demand and bring inflation back to target,” George said, he has the right to vote at this year’s Federal Open Market Committee (FOMC) meetings. The 2022 edition of the Jackson Hole Symposium begins today.

For the central banker, despite the first signs of a slowdown in demand, the rise in inflation in the US is still broad and the key interest rate is not even at a controlled level, requiring further tightening from the central bank. The current range is 2.25% to 2.50%.

According to George, unemployment in the U.S. should rise as the U.S. labor market balances demand and supply, a necessary condition for controlling prices.

As for activity, he said he hasn’t heard many concerns from contacts connected to the Kansas City Fed about a slowdown leading to a recession. According to him, the focus of concern is on the tightening of the labor market, high costs and problems in supply chains.

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