Federal Reserve Dissenting Officer: Need for interest rate hike to contain persistent inflation

On 31 July, two Fed officials voted against the decision to maintain interest rates unchanged and warned that if action on inflation was too late, more radical policy measures might have to be taken later. In a statement on Friday, the Chairman of the Cleveland Federal Reserve said: “The longer high inflation lasts, the harder it will be to lower it again and the higher the costs.” In another statement, the Chairman of the Minneapolis Federal Reserve, Kashkali, stated that, in response to the risk of continued stabilization of high inflation, he was “more inclined to tighten policies in the further acquisition of data on inflation and employment trends”. Both Fed officials pointed out that the current drivers of inflation included multiple supply shocks. Hamak stated that she believed there was pressure on the demand side of the economy. For its part, Kashkali stated that the Fed ' s policy instruments could effectively respond to supply-side inflation, as they had done in the late 1970s and early 1980s. Both he and Hamak noted that the overall economy remained strong and unemployment was low. Kim Xian