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Fed officials promise rate hikes, push back on recession fears

Economy Jun 28, 2022 05:05PM ET
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2/2 © Reuters. FILE PHOTO: Flags fly over the Federal Reserve Headquarters on a windy day in Washington, U.S., May 26, 2017. REUTERS/Kevin Lamarque 2/2

(Reuters) - Federal Reserve policymakers on Tuesday promised further rapid interest-rate hikes to bring down high inflation, but pushed back against growing fears among investors and economists that sharply higher borrowing costs will trigger a steep downturn.

"Many are worried that the Fed might be acting too aggressively and maybe tip the economy into recession," San Francisco Fed President Mary Daly said in an interview on LinkedIn. "I am myself worried that left unbridled, inflation would be a major constraint and threat to the U.S economy and continued expansion."

The Fed, she said, is therefore "tapping the brakes" by raising interest rates to cool demand.

"We are working towards that as quickly as we possibly can, and hopefully Americans everywhere will start to see some relief in their pocketbooks," she said, adding that she expects the economy to slow but not stop growing.

The Fed earlier this month raised rates by three-quarters of a percentage point -- its biggest rate hike since 1994 -- to a range of 1.5%-1.75% to battle inflation that is at a 40-year high. Daly last week said she believes another 75 basis-point rate hike next month will be warranted, though on Tuesday she was not asked specifically about July's meeting.

New York Federal Reserve Bank President John Williams also said he sees the need to act decisively to curb inflation.

"We need to move expeditiously," Williams said in an interview on CNBC. "In terms of our next meeting I think 50 (basis points) or 75 is clearly going to be the debate."

Both Daly and Williams said they expect the unemployment rate to move up a few tenths of a percentage point, from its current 3.6% level, but they both said the labor market is strong and the economy has enough momentum that they do not expect a recession.

In an essay published Tuesday https://www.stlouisfed.org/publications/regional-economist/2022/june/getting-ahead-of-inflation-lesson-1974-1983, St. Louis Fed President James Bullard pointed to two past examples, in 1983 and 1994, when the Fed raised rates but did not trigger a recession, and said the central bank should aim to follow that example.

The Fed's "forward guidance that additional policy rate increases are likely in coming months is a deliberate step to help the FOMC more quickly move policy as necessary to bring inflation back in line with the Fed’s 2% target," Bullard wrote.

The Federal Open Market Committee, known as the FOMC, is the Fed's policy-setting body.

U.S. consumer confidence dropped to a 16-month low in June on worries about inflation, data from the Conference Board showed Tuesday, a signal that Daly said she is watching closely.

"Getting people to feel comfortable that the dollar they earn today will pay for the goods they want tomorrow -- that is no longer something people feel that confident in, and we've got to restore that confidence," she said.

Fed officials promise rate hikes, push back on recession fears
 

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Comments (8)
Nev Kap
Nev Kap Jun 28, 2022 8:25PM ET
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$$$ inflation will erode $$$Dollar
jason xx
jason xx Jun 28, 2022 7:22PM ET
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These things always lie Daly didn't say a 75 was happening in July she said it depends on data like every other time
Alan Rice
Alan Rice Jun 28, 2022 5:33PM ET
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US Economy: RED hot !! REQUIRES "cooling period."
Edward Smyth
Edward Smyth Jun 28, 2022 4:20PM ET
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point is we're all gullible to be even reading this sh.t who needs these peeps to tell us what to do with our dollaz.
Edward Smyth
Edward Smyth Jun 28, 2022 4:16PM ET
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that a promise to bring recession, I'd say yes! well known for being ahead of the markets right?
Dusty Owen
Dusty Owen Jun 28, 2022 2:27PM ET
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They are trying to cool demand…that doesnt exist lol. Their only tool to stop inflation in the broader economy is to cause a recession. Fed rates have zero effect on food or fuel unless they tank the economy. These ppl are evil.
taylor jason
taylor jason Jun 28, 2022 2:27PM ET
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lol the Fed policy isnt aimed at controlling food and energy inflation. they never have and never will. whoever told you that is misinformed
nick cage
nick cage Jun 28, 2022 2:27PM ET
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all the stimulus is pooling in black rock and vanguard. they are going to destroy housing prices and buy it all up. You will own nothing and like it
Warren Wesley
Warren Wesley Jun 28, 2022 11:19AM ET
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what does he call a recession? where is the growth in 2022?
Murat Murat
Murat Murat Jun 28, 2022 10:50AM ET
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Local FEDs speak too much. Why, do u boost ego? After every of their speech markets going deeper
 
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