The contours of the debate at the heart of the Federal Reserve’s policy decision next month came into clearer view on Monday as officials outlined the case for and against another interest rate hike.
“The debate is really about: Do we need to do another rate increase? Or not? … I think we’re pretty close to what a peak rate would be,” New York Fed President John Williams said in an interview with the New York Times in which he voiced some confidence that underlying inflation was on a downward path.
“I do think that we are moving to an environment already where the underlying inflation rate has come down quite a bit,” Williams said in the interview, conducted on Aug. 2and released on Monday. Williams, the vice chair and a permanent voting member of the policy-setting Federal Open Market Committee, said that inflation measures developed by the New York Fed suggest the pace of price increases could slow to as little as 2.5 percent annually by the end of the year, within striking distance of the Fed’s 2 percent target.
In separate remarks to a “Fed Listens” community event in Atlanta, Fed Governor Michelle Bowman said the combination of still-elevated inflation and continued economic growth meant further rate increases are likely.
“I supported raising the federal funds rate at our July meeting, and I expect that additional increases will likely be needed to lower inflation to the (Federal Open Market Committee’s) goal,” she said, referring to the central bank’s benchmark overnight interest rate, which is currently set in the 5.25 percent -5.50 percent range.
