By Howard Schneider and Ann Saphir
WASHINGTON, March 2 (Reuters) - U.S. Federal Reserve
officials wrestled Thursday with whether recent data showing
inflation, jobs and spending all hotter than expected was a
"blip" or a sign that even higher interest rates could be
required to slow price rises.
The separate comments from Fed Governor Christopher Waller
and Atlanta Fed President Raphael Bostic posed a question
central to the next phase of the Fed's battle to lower
inflation: Is monetary policy again slipping behind the curve of
a surprisingly strong economy that needs even tighter credit
conditions, or is slower growth and lower inflation already in
train?
So far, even hawkish voices like Waller say the jury is out,
with jobs and inflation data released between now and the Fed's
upcoming March 21-22 meeting likely key to whether he and
perhaps other policymakers tilt towards higher interest rates.
"Last month we received a barrage of data that has
challenged my view ... that the Federal Open Market Committee
was making progress in moderating economic activity and reducing
inflation," Waller said in comments Thursday to the Mid-size
Bank Coalition of America, an organization of around 100
financial institutions with assets between $10 billion and $100
billion.
"It could be that progress has stalled, or it is possible
that the numbers released last month were a blip," he said.
If upcoming data shows the economy moderating and inflation
slowing, Waller said he would "endorse" the target federal funds
rate rising to roughly the same spot policymakers projected as
of December, when 13 of 19 officials saw rates coming to rest
somewhere from 5.1% to 5.4%.
The current policy rate is set in a range between 4.5% and
4.75%.
"On the other hand if those data reports continue to come in
too hot, the policy target range will have to be raised this
year even more to ensure that we do not lose the momentum that
was in place," Waller said.
Bostic also said he was ready to raise rates higher if
upcoming data did not show inflation "clearly" heading back
towards the central bank's 2% target from its January level of
about 5.4%.
But he also felt the impact of Fed rate increases so far may
only be getting started, a reason to be careful in deciding on
further rate hikes lest the central bank overstep.
"Slow and steady is going to be the appropriate course of
action," Bostic said in comments to reporters, with perhaps only
two more quarter point increases needed before the Fed can
pause.
Fed rate increases "should bite through the spring ... Going
at a measured pace reduces the likelihood we overshoot" and
damage the economy.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
US labor market stays resilient; Q4 labor costs revised higher US manufacturing sector still shrinking; raw material prices
rebound Fed officials debate higher vs. just longer after January
inflation jump U.S. consumer confidence retreats, house price inflation cools
further U.S. core capital goods orders post largest gain in five months;
shipments surge ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Howard Schneider;
Editing by Nick Zieminski and Stephen Coates)
