The US Federal Reserve may have to continue raising interest rates to bring down inflation, the president of the Minneapolis Fed said Monday, opening the door to another hike next month.
The Federal Reserve has raised its benchmark lending rate 10 times since last year as it looks to suppress demand and bring down inflation, which remains stubbornly above its long-term target of two percent.
But despite these aggressive moves, the unemployment rate remains close to record lows, suggesting hiring hasn’t yet been strongly impacted by the tightening of credit conditions.
“The labour market is still hot,” Neel Kashkari – a member of the Fed’s rate-setting committee – told a business conference in Minnesota.
“So that tells me that we have a long way to go before we get inflation back down to our two percent, and we at the Federal Reserve probably have more work to do on our end to try to bring inflation back down,” he said.
Since the last rate decision earlier this month, policymakers have voiced differing opinions on whether the Fed should now pause its aggressive cycle of interest-rate hikes in the face of a slowing economy.
Kashkari’s comments put him among the members of the US central bank’s rate-setting committee suggesting an 11th interest-rate hike may yet be necessary at its next meeting on June 13-14.
“We should not be fooled by a few months of positive data,” Kashkari said.
“We still are well in excess of our two percent inflation target, and we need to finish the job,” he said.
Earlier Monday morning, another member of the Fed’s rate-setting committee voiced support for taking a data-dependent approach to the next interest-rate decision.
The Fed should adopt a “sit-and-watch-it” approach, Chicago Fed president Austan Goolsbee said in an interview with CNBC, adding that full impact of existing hikes had yet to be felt.
“At moments like this, you don’t want to land the plane nose down,” he said.
