Federal Reserve officials offered a range of views on inflation and interest rates Thursday, setting the stage for Chair Kevin Warsh’s highly anticipated Jackson Hole speech on Friday.
Why it matters: Inflation remains above the Fed’s 2% target, but policymakers are increasingly debating whether rates are restrictive enough to bring prices under control—or whether additional tightening is necessary.
Boston Fed President Susan Collins sounded open to another rate hike. “I am open to supporting an increase if I see conditions as not providing that evidence of continued disinflation that I’m looking for,” Collins said. While she doesn’t vote on rate decisions this year, she participates in policy discussions and wrote this week that tightening “soon” could be appropriate without sustained progress on inflation.
- Collins characterized the current federal funds rate, around 3.6%, as “mildly restrictive.”
Kansas City Fed President Jeff Schmid was similarly focused on inflation but less explicit about his preferred next move. “I’m a very strong believer that if we’re going to have a scorecard for the Fed, it’s got 2% inflation, it’s got stable prices on it. We’re not there,” Schmid said.
- He added that the central question is whether current policy is restrictive enough, saying he views the short-term policy rate as “very accommodating.”
Cleveland Fed President Beth Hammack sounded somewhat more optimistic about the direction of inflation, though she expects progress to remain slow. Hammack forecasts inflation ending this year around 3% before declining only into the mid-2% range next year.
The big picture: The comments highlight the debate Warsh must navigate. Fed officials generally agree inflation remains too high, but there is less agreement over how restrictive policy currently is and whether another rate hike is needed.
The bottom line: Warsh will take the stage Friday with markets looking for some clarity. His colleagues have made one thing clear ahead of his speech: The inflation fight isn’t over, but there’s still plenty of disagreement about what the Fed should do next.