Powell Set to Raise Interest Rates a Half Percentage Point

Federal Reserve officials have suggested the central bank could raise its benchmark interest rate by half a percentage point at its Federal Open Market Committee meeting May 3-4.

Aggressive action now would help the central bank tame excess demand levels, many Fed officials believe, even as some observers worry that the job market may suffer and a recession could take place.

While a range of central bankers have voiced support for a half-percentage-point move higher, even the most hawkish Fed officials don’t see a need for a rate rise larger than that.

Here is a roundup of recent comments from central bankers.

Chairman Jerome Powell (April 21 International Monetary Fund panel)

“It is appropriate in my view to be moving a little more quickly, and I also I also think there’s something in the idea of front-end-loading whatever accommodation one thinks is appropriate, so that points in the direction of 50 basis points being on the table. Certainly, we make these decisions at the meeting, and we’ll make them meeting by meeting, but I would say that 50 basis points will be on the table for the May meeting.”

Governor Lael Brainard (April 12 WSJ interview)

“In terms of exactly what the right pace of that set of increases in the policy rate is from meeting to meeting, I don’t merely want to focus on that, but I would just say that the combined effect will bring policy stance to a more neutral posture expeditiously later this year.”

Governor Christopher Waller (April 13, CNBC)

“I prefer a front-loading approach, so a 50-basis-point hike in May would be consistent with that, and possibly more in June and July.”

New York Fed President John Williams (April 14, Bloomberg Television)

A 50-basis-point May rate rise is “a very reasonable option…From a monetary policy point of view, it does make sense for us to move expeditiously towards more normal levels of the federal-funds rate.”

Cleveland Fed President Loretta Mester (April 22, CNBC)

“I would support at this point, given where the economy is, a 50-basis-point rise in May and a few more to get to that two-and-a-half-percentage-[point] level by the end of the year.”

St. Louis Fed President James Bullard (April 18 virtual appearance)

“Not all hope is lost here. I think we’re in a position where we can maintain credibility and get inflation lower,” but when it comes to a 75-basis-point rate rise in May, that action is “not my base case.”

Kansas City Fed President Esther George (March 30 virtual appearance)

“Given the state of the economy, with inflation at a 40-year high and the unemployment rate near record lows, moving expeditiously to a neutral stance of policy is appropriate.”

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