Two of the Federal Reserve's most outspoken policy hawks on Friday pushed back on the view that the U.S. central bank missed the boat on the fight against high inflation, citing a tightening of financial conditions that began well before the Fed began raising interest rates in March.
"How far behind the curve could we have possibly been in terms of time if, using forward guidance, one views rate hikes effectively beginning in September 2021?" Fed Governor Christopher Waller said, noting that yields on the two-year Treasury note rose last fall as the Fed began to signal the end of its super-easy policy.Register now for FREE unlimited access to Reuters.
The two were among the first Fed policy makers last year to call for a rapid removal of easy monetary policy and a quicker start to raising interest rates.But both joined their colleagues in approving the half-point rate hike delivered this week. Fed Chair Jerome Powell, speaking after the rate decision was announced, signaled further increases ahead, including half-point rate hikes in both June and July.
At the same time he described the "punch in the gut" he felt as two weaker-than-expected monthly jobs reports in August and September seemed to undercut the thesis of labor market healing. By early November, most policymakers had come around to the view that high and rising inflationwould not drop quickly enough on its own, and business demand for workers was far outpacing a slow-to-recover labor market supply.
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