(Philadelphia) An official of the American central bank (Fed) estimated on Thursday that rates will have to continue to be raised, and remain at a high level, in order to ensure that inflation slows down durably in the United States.
“I foresee that further tightening may be needed,” to reach a level restrictive enough to effectively slow economic activity and ensure that high inflation gets under way, the station’s chairman said. regional Fed in Philadelphia, Patrick Harker.
Then, “once we get to that point, which is expected to happen this year, I expect us to keep rates at that level and let monetary policy do its job,” said the official, who has in 2023 rotating voting rights at meetings of the FOMC, the decision-making body of the Fed.
Inflation in the United States slowed to 5% year on year in March, the lowest in almost two years, according to the CPI index published last week.
A figure still too high compared to the Fed’s 2% target. However, the institution favors another measure, the PCE index, whose figures for March will be published on April 28.
“Recent data shows that inflation continues to decline, but slowly,” said Patrick Harker during his speech to the Wharton School at the University of Pennsylvania in Philadelphia.
This powerful Fed official also judged that the recent tensions in the banking sector should lead to “tighter credit conditions for households and businesses, which could slow economic activity and hiring”, and thereby helping to calm inflation.
“But the magnitude is not yet clear. What is clear is that the Fed remains fully committed to its 2% inflation target,” he said.
Fed Chairman Jerome Powell indicated after the last meeting on March 22 that a tightening of credit conditions was likely to have the same effect as a rate hike.
The next Fed meeting will be May 2-3. Rates are currently in a range of 4.75-5.00%, the highest since 2007, and most market participants are pricing in another quarter-point hike, according to CME’s valuation. Group.