The aim, Bostic said, is to strike a "delicate balance" that raises the target federal funds rate to a level the economy can absorb without a dramatic downturn, but that will also slow demand and curb inflation over time. "This will allow tighter policy to filter through the economy and ultimately bring aggregate supply and aggregate demand into better balance," said Bostic, who does not have a vote this year on the Fed's interest rate policy. (Reporting by Howard Schneider; Editing by Paul Simao and Andrea Ricci)
By Howard Schneider and Ann Saphir
WASHINGTON, March 1 (Reuters) - U.S. Federal Reserve
officials were divided Wednesday over whether recent high
inflation data and a continually hot jobs market will require
even more restrictive interest rates, or just patience in
maintaining tight monetary policy for a longer period of time.
In remarks to a business event in Sioux Falls, South Dakota,
Minneapolis Fed President Neel Kashkari said he was inclined "to
push up my policy path" after a recent government report showed
the Fed's preferred inflation index accelerated in January to a
5.4% annual rate, more than double the Fed's 2% target and
slightly faster than the month before.
Kashkari, a voter on Fed rate policy this year, said he had
not made a final call yet on a new projection for the target
federal funds rate. But "at this point...I lean towards
continuing to raise further," beyond the 5.4% level that he
previously thought would be adequate to lower inflation.
Fed officials will submit new projections at a meeting in
three weeks, and analysts and investors expect the median rate
seen by officials for the end of 2023 will move perhaps a
quarter point higher than the 5.1% anticipated as of December.
Traders of futures tied to the Fed's policy rate on
Wednesday saw about an even chance the rate will get to a range
of 5.5%-5.75% by September, versus the 5.25%-5.5% range priced
in since a Labor Department report in early February showed U.S.
employers increased payrolls much more than expected in January.
The federal funds rate is currently set in a range from 4.5%
to 4.75% after a rapid set of rate increases last year lifted it
from a near zero level. Officials expect to tack on another
quarter of a percentage point at their next meeting.
The jump in inflation in January, however, has not prompted
a universal call to respond. Of those who've spoken publicly
since the new inflation data was released on Friday, Kashkari is
the first to suggest a higher interest rate might be warranted.
Atlanta Fed President Raphael Bostic said in an essay
released on Wednesday that he still feels a federal funds rate
set in a range of from 5% to 5.25% would be adequate, an outlook
he has maintained despite last week's high inflation reading and
an unexpectedly strong January jobs report.
However he said the policy rate would need to be kept at
that level "until well into 2024," with the Fed committed to not
"reversing course" until it is clear inflation is subsiding.
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