Thursday, December 1 2022

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WASHINGTON — New Federal Reserve Governor Lisa Cook added her voice Thursday to the U.S. central bank’s broad consensus for continued interest rate hikes, as other policymakers joined in reaffirming that ‘they don’t see any relaxation in monetary tightening.

U.S. inflation “remains stubbornly and unacceptably low, and data from recent months show that inflationary pressures remain broad-based,” requiring continued rate increases to be sure it begins to decline, Cook said in his opening remarks. public remarks on monetary policy since joining the Washington-based Fed Board.

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Cook, speaking to the Peterson Institute for International Economics in Washington, said the recent decline in job vacancies, slowing rent increases and other data showing price pressures may be easing were not enough to conclude that the Fed had turned the corner in its fight against rising prices. .

Inflation “has to come down, and we will keep going until the job is done,” Cook said, repeating what has become the Fed’s trademark phrase to relay its desire to raise its key rate target to a low. restrictive and slow the economy, even at the risk of lower economic growth and increased unemployment.

His comments put Cook, who has a doctorate in economics and is the first black woman on the Fed’s board, firmly behind the central bank’s push for further rate hikes.

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Fed Governor Philip Jefferson, in his opening remarks earlier this week, said he too was “committed” to controlling inflation.

In recent days, Fed officials have welcomed recent signs of slowing inflation, tensions in financial markets and the pressure that their monetary policy tightening is putting on economic conditions in other countries – and there is no indication that they are about to change their plans.

At the September 20-21 policy meeting, policymakers signaled they would make a fourth consecutive three-quarters percentage point rate hike at their next meeting on November 1-2, and further rate thereafter.

“Inflation is high right now and we need a tighter monetary policy framework,” Chicago Fed President Charles Evans told the Illinois Chamber of Commerce on Thursday. Based on policymakers’ projections released last month, he said, the U.S. central bank’s benchmark overnight interest rate will head towards the 4.50% to 4.75% range. by next year” which, given how quickly we’ve been raising interest rates, is likely to be spring.

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Minneapolis Fed Chairman Neel Kashkari, speaking at a separate event on Thursday, said at this point there was “almost no evidence” that inflation had even peaked, making a change in the Fed’s plans unlikely.

“We need to keep our eyes peeled for the risks that can destabilize the U.S. economy as a whole,” Kashkari said at the Bremer Financial Corporation Fall Leadership Conference. “But for me, the bar for actually changing our position on politics is very high.”

“SOME PAIN”

The Fed is analyzing data that has started to turn, at least somewhat, in its favor, particularly a recent drop in job vacancies that could point to a looser labor market and lower wage pressure.

But headline inflation remains at a four-year high, with the Fed’s most closely watched measure still operating at more than triple its 2% target.

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“The widespread nature of inflationary pressures suggests that the overall economy is very stretched,” Cook said in his speech Thursday.

As a result, Cook said she “fully supports” the 75 basis point rate hikes approved at the three policy meetings she has attended as Fed governor so far, which she was to agreement with the policy of “front-loading” monetary tightening to accelerate its impact, and believed that policy changes should be anchored in the actual fall in inflation, and not in the forecasts of such a fall.

“The Fed’s precautionary approach is appropriate. Although lower inflation will cause pain, a failure to restore price stability would make it much more difficult and much more painful to restore it in the future,” Cook said. “In the current situation, with risks to inflation forecasts skewed to the upside, I think policy judgments need to be based on if and when we see inflation actually falling in the data, rather than just the forecast. .”

She said that while “at some point” it will be appropriate to slow the pace of increases, she did not hint at her preference for the Fed’s policy decision next month.

“The path of policy should depend on how quickly we move towards our inflation target,” Cook said.

Fed officials may get a hint of a lot more work to do on inflation next week when the Labor Department releases its Consumer Price Index report for September. (Reporting by Howard Schneider; Editing by Paul Simao)

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