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Fed Officials Are Divided on Need For More Rate Hikes

Ask two officials at the Federal Reserve about the need for more rate hikes, and you’ll likely get two different answers.

Key Takeaways

  • Two officials at the Federal Reserve voiced contrasting views about whether the central bank need to hike its benchmark interest rate again to push inflation down.
  • One Fed official said the rate is high enough, while another said more hikes could be needed.
  • Federal Reserve Chair Jerome Powell is scheduled to speak Friday, possibly shedding more light on the Fed’s strategy.

Federal Reserve officials gave differing assessments Thursday at the Jackson Hole Economic Symposium about whether the central bank should raise its benchmark interest rate. Patrick Harker, chairman of the Federal Reserve Bank of Philadelphia and a voting member of the central bank’s policy committee, said the rate is probably high enough, while the Boston Fed’s Susan Collins, a non-voting member, said more increases may be needed.

The contrasting remarks emphasized that it’s very much up in the air whether the Fed will push its key interest rate even higher—and borrowing costs for all kinds of loans along with it.  

Federal Reserve Chair Jerome Powell may provide more clues Friday when he is scheduled to speak at a Fed conference in Jackson Hole, Wyoming. Traders are just about evenly split on whether the Fed will hike its rate for a 12th time before the end of the year, according to CME’s FedWatch tool, which forecasts rate hikes based on fed futures trading data. 

Fed officials are watching for signs that the rate hikes so far have put enough drag on the economy to rebalance supply and demand and put inflation on a firm downward trajectory.

“We’ll let the next couple of weeks play out in terms of data. But right now, I think that we’ve probably done enough,” Harker said in an interview with MSNBC. 

Collins said the decision to hike rates or not would be based on economic data. There is another month of reports before the Fed’s next meeting, which will provide more information about how well the Fed’s war on inflation is going.

“We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time,” Collins said in an interview with Yahoo Finance.