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Fed ‘hawks’ say they may need more drastic rate hikes

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By Howard Schneider

March 18 (Reuters) – Two of the Fed’s most belligerent monetary policymakers said on Friday the central bank needs to take more aggressive action to fight inflation, with one saying he would have supported a bigger rate hike this week if it weren’t. for the war in Ukraine.

Fed Governor Chris Waller said economic risks from the war in Ukraine led him to vote for a quarter-percentage-point interest-rate hike at this week’s meeting, rather than dissent. one greater than half a point.

“The data is crying out for us to go up 50 (basis points), but geopolitical events were telling us to go with caution,” Waller told CNBC.

However, Waller said he would favor a series of half-percentage-point hikes in coming months to “advance” monetary policy tightening and have a quicker impact on inflation.

Fed officials raised interest rates this week for the first time in three years and signaled more hikes are on the way as the central bank withdrew support provided during the coronavirus pandemic, and works to tame inflation at record highs. 40 years.

St. Louis Fed President James Bullard, who dissented this week because he favors a half-point hike, said Friday that officials would raise the Fed’s overnight lending rate to more than 3% this year. , to catch up with high inflation.

Based on Wednesday’s decision, the Fed’s homework target is now 0.25-0.50%.

Bullard said he favored not only a half-point hike this week, but rate hikes at a pace that needed a half-point hike in five of the six remaining Fed meetings this year.

“The US economy has proven especially resilient” in the face of the pandemic and geopolitical risks, Bullard said in a statement explaining his disagreement.

With inflation above 6% by one key measure, triple the Fed’s 2% target, Bullard said more Fed activity was needed “to prudently manage the US macroeconomic situation.”

Although most Fed officials see six more quarter-point interest rate hikes this year, seven of the current 16 Fed policymakers, like Bullard, think rates will set to go higher still. more at the end of the year.

“I am in favor of anticipating rate hikes… More than promising it, it must be done,” he said.

Although he did not specify where he would like the federal funds rate to end the year, Waller said he would prefer to rise above the 2% to 2.25% level that he sees as neutral for the economy.

(Reporting by Howard Schneider; Editing in Spanish by Javier López de Lérida)

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