Federal Reserve policymakers broadly agree that U.S. interest rates should rise further this year and next, despite U.S. President Donald Trump’s displeasure with such a plan, two policymakers’ comments underscored on Thursday.
"Based on what I see today, I think two more rate hikes could be appropriate," along with several more next year as the Fed aims to move interest rates to a neutral setting of about 3 percent, Kansas City Fed Bank President Esther George told Bloomberg TV. The interview was taped on Wednesday, one day before the start of an annual central bankers' conference in Jackson Hole, Wyoming, which she hosts.
Dallas Fed President Robert Kaplan, in a CNBC interview later in the day, said he sees three or four rate increases necessary over the next nine to 12 months.
Trump earlier this week said he was "not thrilled" by the rate hikes that Fed Chairman Jerome Powell has overseen since Trump put him in the job in February.
"Expressions of angst about higher interest rates are not unique to this administration," George told CNBC, using nearly identical language in a separate interview with Fox Business. "We know higher interest rates cause adjustments in the economy."
Kaplan agreed. “Our job at the Fed is to make decisions on monetary policy and supervision without regard to political considerations or political influence, and I’m confident we’ll continue to do that,” he told CNBC.
The Fed began its current round of interest-rate hikes under Fed Chair Janet Yellen in December 2015, and since December 2016 has lifted them every quarter, including in June, when George joined her colleagues in voting for the increase.
Fed Chair Powell is due to speak Friday at the central banking conference. He is widely expected to signal rate hikes will continue, given 3.9 percent unemployment and inflation that's now near the Fed's 2-percent target.
The Fed currently targets short-term rates at between 1.75 percent and 2 percent. This is still well short of 2.5 percent to 3 percent, the level at which most Fed officials believe rates would no longer act as a stimulant to economic growth.
George is one of the Fed's most hawkish policymakers and in the past has consistently advocated a faster path of rate hikes than her colleagues. In the interviews aired Thursday, however, she took care to hedge that view, a possible signal that the Fed is reaching a point where rate-hike policy is less predictable.
George told Bloomberg TV that while upside risks to economic growth from fiscal stimulus could force the Fed to move faster than expected, financial and economic conditions could make the Fed stop short of her 3-percent estimate of neutral.
To CNBC she acknowledged that the flattening the yield curve, which some Fed officials have said gives them pause about further rate hikes, does have an impact on policy-setting.
And to Fox Business Network, she said that if trade tensions do not go much farther than the $50 billion in actual and announced tariffs on Chinese goods, as well as tariffs on imports from other countries, the $20 trillion U.S. economy will likely be little affected. But if they persist, she said, echoing worries by many of her colleagues, the uncertainty could keep businesses from spending, slowing economic growth.
Kaplan also signaled he is concerned that fiscal-policy-fueled economic growth will fade next year, making more rate hikes unnecessary, or at least not as obvious.
“We expect economic growth is going to tail off somewhat down to what we call potential,” Kaplan said.
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