Differing views inside Fed over interest rate hikes

Federal Reserve officials are beginning to voice differing views on the pace of interest rate hikes amid growing concerns about the Fed's tightening policies. Some experts are raising the need to control the pace of interest rate increase as more people are becoming concerned about the risk of an economic recession.

"Federal Reserve officials are starting to stake out different views on how fast to raise interest rates. With the Fed target range now at 3 percent to 3.25 percent and only a few moves from reaching their forecast peak, officials are starting to speak differently about the urgency with which they need to get there," reported Bloomberg on Saturday (local time).

"Uncertainty is certainly high, and there is a range of estimates around the appropriate destination of the target range of the cycle. Proceeding deliberately and in a data-dependent manner will enable us to learn how economic activity and inflation are adjusting to the cumulative tightening," said Vice Chair Lael Brainard of the Fed in a conference jointly hosted by the Fed and the New York Fed.

She stressed the need for tightening to stabilize prices but advised deliberation in rapidly raising interest rates. "Rising dollar value could lead to currency depreciation in other countries, aggravating inflationary pressure, which may require additional tightening to offset the pressure," she said.

Mary Daly, president of the Federal Reserve Bank of San Francisco, said that it was essential to navigating this high inflation environment as carefully as possible so that we don't leave long-term damage to our labor market."

"Aggressive and pre-emptive measures can prevent the worst-case outcomes from coming out. It can be better for policymakers to act more aggressively," said Cleveland Fed President Loretta Mester, a committed hawk who highlighted the need for continued strong measures amid the risk of economic recession.

Some say that the September employment index, scheduled for Friday, will be a turning point in determining the pace of interest rate hikes.


weappon@donga.com