Federal Reserve officials are at a crossroads after implementing 11 interest rate hikes, with differing views on their next steps. Here are quotes from Jerome Powell and other central bankers that shed light on the potential course of action:
Monetary Policy Outlook
- Philadelphia Fed President, Patrick Harker, October 16: “Absent a stark turn in what I see in the data and hear from contacts…I believe that we are at the point where we can hold rates where they are.”
- Federal Reserve chairman, Jerome Powell, October 19: “Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.”
- Atlanta Fed President, Raphael Bostic, October 20: “I really do try to keep people focused on what inflation is, still at 3.7%. Our target is 2. We have to get a lot closer to the 2% [inflation target] before I would consider any relaxation of our posture.”
Current Financial Conditions
- Federal Reserve chairman, Jerome Powell, October 19: “Financial conditions have tightened significantly in recent months, and longer-term bond yields have been an important driving factor in this tightening. We remain attentive to these developments because persistent changes in financial conditions can have implications for the path of monetary policy.”
- Minneapolis Fed President, Neel Kashkari, October 10: “It’s certainly possible that higher long-term yields may do some of the work for us in terms of bringing inflation back down. But if those higher long-term yields are higher because their expectations about what we’re going to do has changed, then we might actually need to follow through in their expectations in order to maintain those yields.”
- Dallas Fed President, Lorie Logan, October 9: “If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the fed funds rate. However, to the extent that strength in the economy is behind the increase in long-term interest rates, the FOMC may need to do more.”
Inflation Expectations and the Labor Market
- Federal Reserve Board of Governors member, Christopher Waller, October 18: “While there is some basis for expecting that inflation will continue to fall, let me remind you, as I have done repeatedly, that we have seen a string of good inflation reports evaporate multiple times in the recent past. So I will be watching the next several reports for clearer indications that inflation is on a trajectory to 2 percent.”
- Boston Fed President, Susan Collins, October 12: “With rates in restrictive territory, I do expect that payroll growth and economic activity more generally will slow in the coming months.”
With various central bankers presenting differing viewpoints, the future path of monetary policy remains uncertain as the Federal Reserve grapples with inflation and financial market conditions.
