On Tuesday, officials of the US Federal Reserve reiterated their support for additional interest rate hikes for curbing inflation.
The President of the New York Fed said that the central bank would have to push up its policy rate to 3.5% and keep it there till the end of next year.
Rate hike path
John Williams, the chief of the New York Fed, said that they need to hold a policy stance, which should be about bringing down inflation by aligning demand and supply.
He stated that this would take longer and was likely to continue till next year. He said that considering the inflation and economic data, it would take some time before they adjust the rates downwards.
The US Federal Reserve began a sharp round of interest rate increases in March, something that has not been seen since the 1980s.
Last week, Jerome Powell, the Fed chair, made it clear that policymakers are committed to increasing the interest rates as high as possible for restricting growth and curbing inflation that is way beyond its 2% target.
He had added that doing so would mean a softer labor market and would also bring pain to businesses and people. But, he had added that allowing inflation to remain high would result in more damage.
The vice chair of the rate-setting panel of the Fed, Williams has a very important role in steering the monetary policy of the Fed.
He said that the decision of the central bank about delivering an interest rate hike of 75 basis points in September, or a smaller one, would depend on the incoming economic data.
This includes the monthly jobs report which is due on Friday and the consumer price index (CPI) data, which would come days before the September 20th meeting of the US Fed.
However, Williams also added that the September decision would also depend on the views of the policymakers about where they want the interest rates to be by the year-end.
He stated that if the data makes it evident that interest rates have to be significantly high by the year-end, then they would stick to a restrictive policy.
He said that their primary goal was to bring down inflation and keep it to the 2% target. The last time that the Fed had published the rate-path expectations of policymakers had been back in June.
At that time, central bankers had seen the rate reaching 3.4% by the end of the year. But, a steeper increase has been priced in by financial markets.
Traders are betting that there would be a hike of 1.5% more by the end of the year. The Fed has three policy meetings remaining for this year, including the one scheduled for September.
Raphael Bostic, the President of the Atlanta Fed, said that inflation was too high, which means they are not done with tightening as yet.
He also added that incoming data would need to show that inflation has started to come down before they decide to dial back.