Louis Fed: Active interest rate hike will allow the US Federal Reserve to better deal with still high inflation, St. Louis Federal Reserve Bank President James Ballard told CNBC.
« Lately, they often say that we need to slow down and find our way to the goal. But we have not yet reached the so-called final level of the bet, » he said. « Let’s first reach this level, and then we will think about what else needs to be done. ».
Ballard is considered one of the Fed’s top hawks but is not voting on the rate this year.
Last week, Ballard and his Cleveland Fed colleague Loretta Mester said they supported a more aggressive rate hike at the upcoming March meeting by 50 basis points instead of the market’s expected 25 bp.
Louis Fed « If inflation continues to fall, everything will be fine, » Ballard said. « The risk is that inflation will not go down but will start to rise again, and then what do we do? We will have to react. If inflation does not slow down, we may see a repeat 1970s, when inflation was fought for 15 years. So let’s persevere now; let’s get inflation under control already in 2023. »
At the same time, he believes that this can be achieved without plunging the US economy into recession. « China is coming into play, and Europe is stronger than we thought. As a result, there is a feeling that the US economy may be more resilient than the markets thought 6-8 weeks ago, » Ballard said.