WASHINGTON: A key US Federal Reserve official warned Friday that a series of interest rate hikes could be needed if price shocks from the Middle East war are larger than expected, fuelling inflation.
“Federal funds rate increases, potentially a series of them, could be warranted, even at the risk of further weakness to the labour market,” Minneapolis Fed President Neel Kashkari said, explaining his dissent to the central bank’s overall decision this week.
Kashkari was among four of 12 officials who voted against the Fed statement Wednesday after a two-day policy meeting.Like him, two other regional Fed presidents, Beth Hammack and Lorie Logan, supported the decision to hold rates steady but not the bank’s signal that a rate cut was their next likeliest move.
Fed governor Stephen Miran, however, continued pushing for a rate cut.The rate-setting Federal Open Market Committee “should offer a policy outlook that signals that the next rate change could be either a cut or a hike, depending on how the economy evolves,” Kashkari said.
He flagged risks from an extended closure of the Strait of Hormuz due to conflict in the Middle East.Tehran has virtually blocked the waterway, a key route for energy and fertiliser shipments, after US-Israeli strikes since February 28.
This has caused a surge in oil prices, feeding into worries that inflation could be more persistent.In a separate statement, Hammack of the Cleveland Fed said: “I dissented from the post-meeting statement because I did not believe it was appropriate to include an easing bias around the future path for monetary policy.”“Inflation pressures continue to be broad based, and rising oil prices present an additional source of inflationary pressure,” she said.
