faster rate hike after summer if inflation persists

Washington (awp/afp) – An official of the American central bank (Fed) said on Friday that she expects rate hikes of more than half a point as early as September if inflation does not slow, warning that the necessary measures could increase unemployment and slow growth.

“Unless there are any big surprises, I expect it to be appropriate to raise the policy rate by an additional 50 basis points (half a percentage point, editor’s note) at each of our two next meetings”, in mid-June and then at the end of July, underlined Loretta Mester, president of the Cleveland Fed.

And if by the September meeting, “inflation is falling, then the pace of rate hikes might slow down, but if inflation hasn’t moderated, then a faster pace of rate hikes might be necessary,” she said.

The Fed began raising rates to dampen demand, by a quarter of a percentage point in March and then by half a point on May 4 — the biggest hike since 2000. Policy rates are now between 0.75 and 1.00%.

“It will be difficult to carry out the necessary tightening of monetary policy to control inflation while maintaining healthy conditions in the labor market”, also warned this voting member of the Fed’s monetary committee, in a video speech during an event organized by the European Central Bank in Frankfurt (Germany).

“Growth could slow a little more than expected for a few quarters and the unemployment rate could rise temporarily,” she warned.

The day before, the president of the monetary institution, Jerome Powell, whose appointment the Senate has just confirmed for a second term of four years, had warned that controlling inflation would not be painless.

“It will probably take time to bring inflation back to our long-term target of 2%,” added Loretta Mester.

Inflation, which had reached its highest level in 40 years in March, slowed down a little in April in the United States but remained very high, at 8.3% over one year, according to the CPI index.

“I will need to see several months of substantial decline in inflation before concluding ‘it has’ peaked,” Mester said again.

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