Nov 19 (Reuters) – Policymakers at the Federal Reserve are considering raising interest rates more than they thought necessary a few months ago as inflation continues to rise and the economy picks up.
The change comes as President Joe Biden is about to decide whether to keep Jerome Powell for another term as chairman of the Federal Reserve, or whether to promote Governor Lyle Brainard to that position instead. Earlier this week, Biden indicated that he may make an announcement on Friday.
Whichever Biden chooses will face the thorny task of directing the Fed’s two goals, stable prices and full employment, when they appear increasingly in conflict.
Both Powell and Brainard have said that they believe the current rise in inflation will decline over the next year as the supply chain is repaired, and have argued that the Fed needs to give more time to those millions of Americans in interest. The rates should be floored by those who have lost their jobs or leave the workforce during the pandemic to get jobs if they want.
On Thursday, one of the most trusted proponents of the US central bank’s loose monetary policies said it is “more open” to raising interest rates next year than it was six months ago. Chicago Federal Reserve Chairman Charles Evans said raising interest rates in 2022 may be justified if inflation persists despite expectations to the contrary.
“I wouldn’t call it pressure or anything like that,” Evans told reporters after a conversation. “But I will say that I have to admit that it has dragged on, that things are not quite as clear as I had hoped; that patience is hard, and that things may stir sooner than I imagined , or that it may be that I am on the wrong plane and we have to move on.”
Meanwhile, Atlanta Federal Reserve Chairman Rafael Bostic said he believed the US central bank could start raising interest rates in the middle of next year based on job prospects.
“Right now, our projections suggest that by the summer of next year, the number of jobs we will have in the economy is more or less where we were before the pandemic,” Bostic said in an interview with NPR’s Marketplace program. “And at that point, I think it’s appropriate that we try to normalize our interest rate policy.”
Bostic previously said he was among half of Fed policymakers who, as of September, thought a rate hike for next year would be appropriate, but publicly adopting a takeoff in mid-2022 is new. ,
At their policy-making meeting last month, Fed officials decided to begin rolling back support for the economy, which was gradually reduced to zero by next June, by $120 billion in monthly asset purchases.
Since then, some policymakers have advocated a more restrictive approach and a quicker cut, to prepare the Fed for earlier rate hikes should it be necessary.
Evans challenged that view on Thursday. “The hope is that we don’t increase rates before[the end of the incentive withdrawal]; the expectation is that we don’t adjust[withdrawals]unless, depending on the state, we see a major change in the data.” ,” They said. said.
However, traders are already adjusting their expectations, and interest rate futures already believe that the three rate hikes before the end of next year are more likely than the rest.
In September, only half of those responsible for monetary policy at the Federal Reserve thought they would have to start raising rates next year, and the other half made the first hike more likely in 2023.
The Fed will offer a better reading on the degree of change in opinion among monetary leaders when it releases new quarterly forecasts when its next monetary policy-making meeting ends on December 15.
(Reporting by Ann Safir; Editing by Leslie Adler, translated by Jose Muoz in the Gdask Newsroom)