An official of the American central bank (Fed) estimated Thursday that the rates will have to continue to be raised, and remain at a high level, in order to ensure that inflation slows down durably in the United States.
I foresee that further tightening may be needed to reach a sufficiently restrictive level to effectively slow economic activity and ensure that high inflation gets in the way, said the president of the regional office of the Philadelphia Fed, Patrick Harker.
Then, once we get to that point, which is expected to happen this year, I expect us to hold rates there and let monetary policy do its thing, said the official, who in 2023 has the right to voting system at meetings of the FOMC, the Fed’s decision-making body.
Inflation in the United States slowed to 5% over one year in March, the lowest in almost two years, according to the CPI index published last week.
A figure still too high compared to the Fed’s 2% target. However, the institution favors another measure, the PCE index, whose figures for March will be published on April 28.
Recent data show that inflation continues to decline, but slowly, noted Patrick Harker again during this speech to the Wharton School of the University of Pennsylvania, Philadelphia.
This official of the powerful Fed also judged that the recent tensions in the banking sector should lead to stricter credit conditions for households and businesses, which could slow down economic activity and hiring, and thus contribute to calming inflation.
But the magnitude is not yet clear. What is clear is that the Fed remains fully committed to its 2% inflation target, he said.
Fed Chairman Jerome Powell indicated after the last meeting on March 22 that a tightening of credit conditions was likely to have the same effect as a rate hike.
The next Fed meeting will be May 2-3. Rates are currently in a range of 4.75-5.00%, the highest since 2007, and most market players are expecting another quarter-point rise, according to CME Group’s assessment. .