Fed Officials Signal Openness To Higher Rates As Inflation Risks Persist

According to Lianhe Zaobao citing Reuters, three senior Federal Reserve officials spoke publicly within a week to flag inflation risks and suggest they could support higher interest rates at upcoming policy meetings. Cleveland Fed President Beth Hammack said on Friday, July 17, that stubbornly high inflation is a bigger concern than economic growth, while Dallas Fed President Lorie Logan said on Thursday in Houston that current inflation calls for “slightly higher interest rates.” Fed Vice Chair Philip Jefferson said at a Stanford University event on Friday that if inflation does not start to cool soon, reconsidering the current policy stance could be appropriate. Evercore ISI analyst Krishna Guha said the hawkish comments were meant to manage market expectations, adding that if inflation stays hot over the next two months or if continued U.S.-Iran conflict pushes oil prices and inflation expectations higher, Fed Chair Woshe could follow through on his tough stance and raise rates at the September meeting. U.S. June inflation slowed to 3.5% from 4.2% in the prior month, but remained well above the Fed's 2% target. Markets are pricing in a 15% chance of a July rate hike and a 65% chance of a September increase. New York Fed President John Williams said he believes the current “undeniably” high inflation will ease soon, while Woshe declined to comment on the inflation outlook during a congressional hearing.