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Federal Reserve officials will look at whether to take a more aggressive half-a-percentage point hike in their benchmark interest rates at the next meeting in early May, said Kansas City Fed President Esther George, on Tuesday.
“I think 50 basis points is going to be an option that we’re going to have to consider, along with other things,” George said, in an interview on Bloomberg News
George didn’t indicate that she would favor a 50-point move. Fed officials will gather on May 3-4 to discuss monetary policy. Traders in the Fed funds futures market are expecting there will be a 50-basis point move.
George said the Fed needed “to be very deliberate and intentional” as it moves away from its easy money policy stance introduced in 2020 to combat the economic impact of the pandemic.
At the May meeting, Fed officials could also announce a date for the start of shrinking the $9 trillion balance sheet.
Shedding assets from its portfolio is another form of “removing accommodation” or moving away from the easy policy stance.
George said she was “very focused” on how the balance sheet moves as the Fed raises its policy interest rate.
“We have a ways to go” to get away from an easy policy stance, George said.
Former Fed official Lawrence Lindsey said Monday he was concerned that higher inflation will cause a recession.
George said the economy is going to slow this year as fiscal policy is removed and the Fed raises rates.
But she said consumer demand remains very strong and households have healthy balance sheets.
She said she would watch how economic activity unfolds as the Fed moves away from its easy stance.
Stocks were mixed in late morning trading with the Dow Jones Industrial Average
DJIA,
up slightly. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose sharply to 2.531%.
