USA: For Daly (Fed), a rate hike of 50 or 75 points in September is reasonable | Photo credits: Istock
Aug 18 (Reuters) – San Francisco Federal Reserve Chair Mary Daly said on Thursday that a U.S. central bank rate hike of 50 or 75 basis points in September would be a “reasonable” way to reduce the cost of credit to just over 3% by the end of the year and a little beyond in 2023.
Once rates are at that “tight” level and will dampen growth and inflation, the Fed should hold them there and not cut them quickly, Mary Daly said in an interview with CNN International.
The Fed is determined to bring inflation back to the 2% target it has set but it must not make an “unintended mistake” by tightening its monetary policy too much, she added .
For his part, Neel Kashkari, his counterpart at the Minneapolis Fed, said that the central bank must bring down as soon as possible what he considered “very very” high inflation, including if that meant taking the risk of trigger a recession.
“We urgently need to bring inflation down,” he told a public meeting organized by a local federation of entrepreneurs. “We need to lower demand” by raising interest rates, he added.
Neel Kashkari said the fundamentals of the US economy were solid but admitted that he did not know if the Fed could bring down inflation without triggering a recession.
(Report Ann Saphir and Howard Schneider, French version Laetitia Volga, edited by Marc Angrand)