You might even think they knew what was coming. (Which of course the Federal Reserve does.)
The pixels weren’t even dry on this morning’s CPI inflation report–6.4% year over year, a 10 basis point drop from December, but a 0.5% month-to-month increase from December–before Federal Reserve officials were out talking up the idea that the Fed will have to raise interest rates more to bring inflation down to its 2% target.
Richmond Fed President Thomas Barkin, in a Bloomberg TV interview, said that “if inflation persists at levels well above our target, maybe we’ll have to do more.”
Dallas Fed President Lorie Logan said in a speech at Prairie View A&M University: “We must remain prepared to continue rate increases for a longer period than previously anticipated, if such a path is necessary to respond to changes in the economic outlook or to offset any undesired easing in conditions.”
Philadelphia Fed President Patrick Harker said the Fed still has more work to do to bring inflation under control. “At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place and let monetary policy do its work.
Economists at Barclays Plc and Monetary Policy Analytics now see the Fed lifting rates to a range of 5.25% and 5.5% from a previous Wall Street consensus of a peak rate at 5.2%. The higher forecast “reflects our view that the Fed will need to see material slowing in labor market outcomes to convince itself that wages are on course to return to rates of increase consistent with 2% inflation and that such evidence will not be evident until midyear,” Barclays economists wrote in a note to clients.
Feeding into the higher and longer sentiment is a new forecast from the Atlanta Fed’s GDP tracker that estimates first-quarter GDP growth at a relatively strong at 2.2% annualized rate, as of February 8.