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Fed Says Rate Increases Are Close Due to Inflation

San Francisco Fed Chairman Daly said, "To reduce demand, interest rates need to increase and be aligned with limited supply,"

Fed Says Rate Increases Are Close Due to Inflation
Yazar: James Gordon

Yayınlanma: 18 Ocak 2022 01:09

Güncellenme: 24 Kasım 2024 04:54

Federal Reserve (Fed) Governor John Williams said on Friday that it "makes sense" for the central bank to start raising interest rates this year, after dramatic developments in the labor market and the Fed's announcement higher than its 2% target. "We're clearly seeing inflation that's higher than we'd like and not coming down yet. We're getting close to that kind of decision," Williams told reporters. In December, policymakers began to slow down their bond purchases to take a position to start a possible early rate hike. Now that possibility has become almost certain, at least according to the bets on the financial markets.

Omicron Effect

Policymakers noted that the recent surge caused by the Omicron variant could slow economic growth and prolong supply chain disruptions that contribute to excessively high inflation. Mary Daly said the Fed should raise interest rates to reduce demand and align it with limited supply. "Once the Omicron wave subsides, the economy should return to a solid growth trajectory and supply constraints should ease over time," John Williams said at a virtual event hosted by the Council on Foreign Relations. The Fed official said he expects the labor market to continue to improve as the economy grows and predicts the unemployment rate will fall to 3.5% this year. Williams said that "gradually" increasing interest rates would be the next step in eliminating settlement, but the exact timing and pace of these rate hikes will depend on inflation and developments in the economy.
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