Fed's top official backs slowing rate hikes

Michael Barr, a Reuters Federal Reserve Vice Chair of Supervision, said he was among U.S. central bankers backing a slowdown in interest rate hikes as soon as the Fed's December 13 -- 14 meeting.

Barr said at the American Enterprise Institute that we're at a point because we believe we're in restrictive territory and that we can get to a sufficiently restrictive rate at a slower pace. We're going to be considering this. That's smart and will give us space to start to modulate and then think about how high it needs to be, how long it needs to be, and how long it needs to stay at that rate in order to get the job done. The Fed raised its policy rate in 75 basis-point increments at each of its last four meetings, bringing the short-term overnight lending rate to a 3.75% -- 4% range in the steepest set of rate increases since the 1980 s.

The Fed preferred gauge's preferred gauge has risen to 6%, triple its 2% target, because of the sharply higher borrowing costs, which are intended to slow the economy, curb demand and ease price pressures that have pushed inflation by the Fed's preferred gauge to 6%.

Fed Chair Jerome Powell said on Wednesday that the central bank would likely raise rates by a smaller half-a-point at its next meeting, as policymakers find their way to a sufficiently restrictive level to bring down inflation without going too far and crashing the economy with overly tight policy.

Barr's comments aligned closely with Powell's comments, which caused a stock market surge as investors cheered what they heard as a dovish message that the current round of policy tightening would end sooner than thought.

Barr pushed back on Thursday, saying it was a misreading to think about a change in the pace of increases as a reflection of the seriousness of the project of bringing inflation down.

He said that the rate is going to have to stay high for a long time, because it's going to take a long time to bring inflation down to 2%.

The Fed's top Wall Street regulator was his main focus for the hour long event with Barr focused on financial supervision and the banking industry.