WASHINGTON: All three US Federal Reserve policymakers who dissented from the central bank’s decision to keep interest rates steady earlier this week said Friday (Jul 31) that rate hikes were needed now in order to avoid entrenched inflation.
The Fed held rates at 3.50-3.75 per cent for its fifth straight meeting on Wednesday, with three of the committee’s 12 members dissenting in favour of a quarter-percentage-point rate hike.
That number of dissents is unusual and illustrative of the challenge the Fed faces in bringing inflation back down to its two-per cent target – a level it hasn’t hit in more than five years.
“Inflation has been too high for too long,” said one of the dissenters, president of the regional Cleveland Fed, Beth Hammack. “The longer that high inflation persists, the more challenging and costly it can be to bring it back down.”
US households have been battered by the high prices, and inflation spiked to three-year highs on the back of US President Donald Trump’s war on Iran since March, with skyrocketing energy prices bleeding through into other products.
Neel Kashkari, president of the Minneapolis Fed, dissented alongside Hammack, and in a statement on Friday said he thought it was necessary to “tighten policy incrementally as we gather more data on the path of inflation and employment.”
“If inflation remains elevated, in my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary,” he said.
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