An official of the US Federal Reserve ruled, in a speech Wednesday in Detroit, that the Fed should continue to raise key rates “in smaller steps”.
Lisa Cook, a Fed governor, said that after the rate hikes already made, “the impact of monetary policy will take time”.
“Under these conditions, as we approach an uncertain destination, it would be prudent to take smaller steps,” she said as the central bank meets on December 13 and 14 to decide on a new tightening of the monetary screw to fight inflation.
The official, who was speaking ahead of a speech by Central Bank Chairman Jerome Powell, did not commit to her estimate of the final level where federal funds rates could be driven.
“Which rate would be restrictive enough” to curb inflation, “we will only know over time by watching how the economy evolves,” Cook said.
One of his colleagues, James Bullard, of the St. Louis Fed, had estimated on Tuesday that this final rate should be at 4.9%, which implies further increases.
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Overnight rates are currently between 3.75% and 4% after starting from almost zero at the start of the year. Markets expect the Monetary Committee to raise rates by just half a percentage point at the next meeting in two weeks, after four straight increases of three-quarters of a percentage point.
In her review of the economy, Ms Cook considers the latest inflation barometer (7.7% in October year-on-year, according to the CPI index) “to be encouraging”, but she points out that “two-thirds of spending consumption” of Americans “were in services” and that prices in this sector “had not yet slowed down”.