Fed's Esther George sees rate hike in about 2% by August

Reuters- Kansas City Federal Reserve Bank President Esther George said on Monday that she expects the central bank to lift its target interest rate to about 2% by August, with further action dependent on how both supply and demand are affecting inflation.

George said in remarks for delivery to an agricultural symposium put on by the Kansas City Fed that the federal funds rate would be in the neighborhood of 2% by August and that policymakers have committed to act quickly to restore price stability. Evidence that inflation is decelerating will inform judgements about further tightening. The Fed has lifted short-term borrowing costs from near zero to a range of 0.75% -- 1% this year, because of the rise in interest rates that are at a 40 year high. Jerome Powell, Chair of the Fed, said the central bank will raise rates by a total of another full percentage point over the next two Fed meetings in June and July.

The central bank's action after that has been a topic of debate among policymakers. George used many of her prepared remarks to outline the crosscurrents that affect the U.S. economy that make it hard to judge what will happen with inflation: Russia's war and China's COVID 19 lockdowns could hurt global growth and cause inflation pressure, or they could disrupt world productive capacity and add to inflation pressure.

George said that the central bank's job is to prevent persistent imbalances from feeding into inflation and unmooring inflation expectations.

She said that the Fed's interest rate hikes can only reduce demand but don't affect supply factors that are also important for inflation. The course of monetary policy will be affected by the evolution of its efforts, as well as other factors, due to continuous and careful monitoring.