(Washington) A US central bank official said on Friday that the conflict in Ukraine had prompted a mere quarter-point rate hike on Wednesday, but was advocating for one or more major hikes by half a percentage point this year. .
Posted at 12:26 pm
The Fed raised rates on Wednesday for the first time since 2018 in the wake of inflation.
The company carefully chose to raise them, raising them to the usual quarter percentage point and not directly by half a point. Rates in the range of 0 to 0.25% from March 2020 are now between 0.25 and 0.50%.
Christopher Waller, one of the Fed’s governors, explained that economic data, and especially rising inflation, “strongly encourages us to raise rates by 50 basis points”, but “geopolitical events suggest that we should proceed with caution.” Friday CNBC.
“These two factors together led me to support the 25 basis point increase we approved, rather than supporting the 50 basis point increase in this meeting,” he said.
But Christopher Waller argued at future meetings that the Fed would have to resort to more aggressive increases, “if we are to have an impact on inflation later this year and next.” It refers to [une hausse de] 50 basis points for one or more meetings in the near future ”.
By the end of 2022, rates should be around the level of what is considered “neutral” and should be kept between Mr. Waller 2 and 2.15%.
And the balance sheet reduction should start “before” the July 26 and 27 meeting, which means the next meeting will start on May 3 and 4 or the next June 14 and 15, he said.
The Fed will gradually part with billions of dollars in treasury bills and other assets purchased from March 2020 in support of the economy.
In Wednesday’s vote, only one official, St. Louis Fed President Jim Bullard, voted against the 0.25 percentage point increase, saying he was opting for a faster, 0.50 point increase.
Such an increase, as well as “implementation” [d’] The Fed’s plan to reduce its balance sheet size would have been more appropriate, “he said in a written statement on Friday.
“Despite the geopolitical risks, the US economy is expected to grow at a much higher rate than its long-term potential growth rate in 2022 and 2023,” he said.
This, combined with high inflation, “means that the committee’s policy rate is currently very low,” he added, stressing that “the Fed must move quickly to rectify this situation or risk losing its credibility on its inflation target.”
He is pushing for rates to stay “above 3% this year”.