Federal Reserve officials are sending mixed signals on inflation and the rate path ahead of Chair Warsh’s scheduled speech at the Jackson Hole symposium, according to Bloomberg. The main disagreement centers on whether current policy is restrictive enough to weigh on the economy.
Kansas City Fed President Jeff Schmid said short-term rates may still be accommodative, suggesting the Fed still has more work to do. Cleveland Fed President Beth Hammack took a similar line, saying policy is not yet restrictive enough and should be tightened further if inflation is to return to 2% within a reasonable time frame.
Others struck a more measured tone. Boston Fed President Susan Collins said current rates are “modestly restrictive,” while Chicago Fed President Austan Goolsbee said policymakers could keep watching incoming inflation data, though he would be concerned if services inflation stays elevated or starts rising again.
July PCE inflation in the U.S. rose 3.7% year over year. Rate futures show markets are pricing in roughly a 36% chance of a September hike. The Fed left the federal funds rate unchanged at 3.5% to 3.75% in July, when three officials supported a rate increase. Warsh is set to speak at 22:00 Beijing time on Aug. 28.
Federal Reserve officials are offering different readings on inflation and the interest-rate outlook ahead of Chair Warsh’s speech at the Jackson Hole symposium, according to Bloomberg. The core disagreement is whether current rates are restrictive enough to put sufficient pressure on the economy.
Kansas City Fed President Jeff Schmid said short-term rates may still be accommodative, adding that the Fed may still have more work to do. Cleveland Fed President Beth Hammack also said policy is not restrictive enough at current levels and that further tightening would be needed if inflation is to return to 2% within a reasonable time frame.
Boston Fed President Susan Collins, by contrast, said current rates are “modestly restrictive.” Chicago Fed President Austan Goolsbee said officials can continue to wait for more inflation data, but added that he would be concerned if services inflation remains high or starts to move up again.
On the data side, the U.S. personal consumption expenditures price index rose 3.7% year over year in July. Rate futures show the market is assigning about a 36% probability to a September rate hike.
The Fed kept the federal funds rate unchanged at 3.5% to 3.75% in July, when three officials backed a rate increase. Warsh is scheduled to speak at 22:00 Beijing time on Aug. 28.
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