ChainCatcher, citing Jin10, reported that Federal Reserve officials indicated they may soon need to raise interest rates instead of cutting them, especially against the backdrop of rapidly rising inflation. The comments keep the direction of U.S. monetary policy tied closely to inflation developments, rather than pointing directly toward easing.
Evercore ISI analyst Krishna Guha said that a pullback in energy prices could provide some relief. However, he added that the interest-rate outlook has become disconnected from oil prices, and uncertainty remains over whether underlying inflation is cooling. In his view, changes in energy prices alone are not enough to settle the question of the Fed’s next rate move.
Claudia Sahm, chief economist at New Century Advisors, said the conditions that would prompt the Federal Reserve to respond to supply-driven inflation have not yet appeared. Still, she acknowledged that the case for action is accumulating. The remarks bring the discussion of raising rates rather than cutting them back into the policy debate surrounding the Fed.