Fed Officials Call for More Rate Hikes Even as Price Pressures Cool

Federal Reserve officials Friday stressed further interest-rate hikes are needed to tame inflation even though there are emerging signs that price pressures are cooling.

Atlanta Fed President Raphael Bostic said inflation is still too high and reiterated he favors raising interest rates above 5%, compared to the current level of just below 4.5%. Richmond Fed President Thomas Barkin, in separate remarks, said “we still have work to do” to bring price gains back to the Fed’s 2% goal.

In another speech, Fed Governor Lisa Cook highlighted several signs of easing inflationary pressures, including decelerating wage gains, while emphasizing that inflation remained far too high for the Fed’s liking.

They all spoke after two key data releases on Friday morning suggested the Fed’s efforts at taming inflation were working.

The government’s December jobs report showed US average hourly earnings rose 0.3% in December from a month earlier and 4.6% from December 2021 — both less than expected — after a downward revision to November. But job growth remained solid and the unemployment rate declined to 3.5% from 3.6%.

A separate release showed service industries were unexpectedly weak last month and price gains ebbed slightly.

What Bloomberg Economics Says...

“Momentum in the labor market may have picked up again after loosening somewhat toward the end of last year. Together with what we know about early revisions to benchmark data, that leads us to expect two more 25-basis-point rate hikes by the Fed, with the terminal rate reaching 5% in March.”

— Anna Wong and Eliza Winger, economists

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