Federal Reserve policymakers have signaled they will go ahead with rate hikes, and a number of them are backing a higher interest rate of at least 5% even as signs appear that inflation has already peaked and economic activity is slowing.
Cleveland Fed Chair Loretta Mester said Wednesday in an interview with the Associated Press, "I think we need to continue, and we'll discuss at the meeting how much to do."
Meester added that she expects interest rates will need to go "a little higher" and stay at that level for some time to slow inflation further.
Her comments appear to reflect a view widely shared by fellow policymakers.
The overnight lending rate is currently in the target range between 4.25% and 4.50%, and investors expect the Federal Reserve to raise this rate by a quarter of a percentage point at the end of its meeting on January 31 and February 1.
But slower spending, inflation and manufacturing announced on Wednesday helped support expectations that the Fed will end its current round of rate hikes sooner than Mester and most of her colleagues had expected, with an interest rate just under 5%.
Like Meester, St. Louis Federal Reserve Chairman James Bullard said, in an interview with The Wall Street Journal, that he also expects the interest rate to rise to the range of 5.25-5.5%, adding that policy makers should exceed 5%. % as soon as possible.
Don't stop before defeating inflation
A number of US central bank officials have expressed support for slowing rate hikes to a quarter of a percentage point, after a much faster pace last year of 75 and a half percentage point increases.
And policy makers in the US Central Bank say that the mistake they do not want to make is to stop before defeating inflation, and to have to raise interest rates at a higher rate to defeat it at a later time, as happened in the seventies and eighties.
Even Patrick Harker, chairman of the Philadelphia Federal Reserve, who is less hawkish than Mester or Bullard and wants to shift to quarter-percentage-point increases in the future, forecasts further hikes in borrowing costs before stalling.
Fed Chairman Jerome Powell said after last month's policy meeting that "the battle of inflation has not been won, and 2023 will see further interest rate increases."