The Federal Reserve Board of Governors member believes that after the hikes already made, “the impact of monetary policy would take time.”
A US Federal Reserve official said in a speech Wednesday in Detroit that the Fed should continue to raise key rates “in baby steps.”
Lisa Cook, Fed governor, said that after the rate hikes already made, “the impact of monetary policy will take time.”
“In these conditions, as we approach an uncertain destination, it would be prudent to take smaller steps,” he said as the central bank met on December 13 and 14 to decide on a new tightening of the monetary screw to fight inflation.
The official, who was speaking ahead of a speech by central bank chairman Jerome Powell, did not engage in his estimate of the final level to which federal funds rates could be driven.
“What rate would be tight enough” to curb inflation, “we’ll only know over time as we look at how the economy develops,” Ms Cook said.
His colleague, James Bullard, of the St. Louis Fed, estimated on Tuesday that this final rate should be 4.9%, implying further hikes.
Overnight rates are currently between 3.75% and 4% after starting from near zero at the start of the year. Markets expect the Monetary Committee to hike rates by just half a percentage point at its next meeting in two weeks’ time, following four consecutive three-quarter percentage point hikes.
In her analysis of the economy, Cook believes that the latest inflation barometer (7.7% in October on an annual basis, according to the CPI) “was encouraging”, but points out that “two-thirds of spending on consumption” of the Americans “were in services” and that prices in this sector “had not slowed down yet”.
