Monetary policy

Former Treasury Secretary Lawrence Summers called on the Federal Reserve to deliver a clear message saying it will need to impose "restrictive" monetary policy that drives up the U.S. unemployment rate in order to quell inflation.

Federal Reserve Bank of San Francisco President Mary Daly said the central bank should raise interest rates "a little" above 3% by the end of the year to cool inflation, pushing back against investor bets that officials would then reverse course.

Two Federal Reserve officials responded to softening inflation data by saying it doesn't change the U.S. central bank's path toward even higher interest rates this year and next.

The Federal Reserve is committed to cooling inflation and needs to raise interest rates to a little above 4% to ease demand, Cleveland Federal Reserve Bank President Loretta Mester said.

St. Louis Fed Bank President James Bullard said he favors a strategy of "front-loading" big interest-rate hikes, and he wants to end the year at 3.75% to 4%, while his Richmond counterpart, Thomas Barkin, said the central bank was committed to lowering inflation and a recession could happen.

The report from Senate Homeland Security Committee ranking member Rob Portman, R-Ohio, details China's campaign to infiltrate the Federal Reserve. But even amid rising tensions between the U.S. and China, response to the report has been muted.

Federal Reserve officials said they want strong evidence that the hottest inflation in four decades is on a sustainable downward path before declaring victory in their fight against it.

The day after the Federal Open Market Committee's next meeting we will analyze the increase and the signals about what rate hikes may be coming.

Federal Reserve Bank of Minneapolis President Neel Kashkari said the central bank is committed to doing what’s necessary to bring down demand in order to reach policy makers’ 2% long-term inflation goal, a target that remains far off.

Former Treasury Secretary Lawrence Summers said he was concerned the Federal Reserve is still engaging in “wishful thinking” about how much it will take to bring inflation down from four-decade highs.

The Federal Reserve’s Inspector General said Chair Jerome Powell and former Vice Chair Richard Clarida’s trading activity had not broken any laws or rules, but the probe into the former heads of the Dallas and Boston regional Fed banks remained open.

Waller is the first Fed policy maker to explicitly express openness to an increase larger than 75 basis points at the July meeting.

Federal Reserve Bank of Atlanta President Raphael Bostic said “everything is in play” for policy action after data showed that U.S. inflation accelerated again to a fresh four-decade high last month.

The Federal Reserve has aggressively ratcheted up interest rates to tame inflation. But that swift turnaround after more than a decade of accommodative monetary policy could create new risks to the financial system.

“I am one of the guys who like the option value of deciding the week of the meeting as opposed to two weeks before the meeting,” he told reporters Tuesday.

Federal Reserve Bank of Atlanta President Raphael Bostic said the U.S. economy can cope with higher interest rates and repeated his support for another jumbo move when the central bank meets later this month.

Federal Reserve Bank of Kansas City President Esther George, who dissented last month against the central bank’s jumbo 75 basis-point increase in interest rates, cautioned that rushing to tighten policy could backfire.

Federal Reserve Governor Christopher Waller said he supports raising interest rates by 75 basis points this month for a second straight meeting and “probably” a 50 basis-point hike at the following gathering in September.

Federal Reserve officials agreed last month that interest rates may need to keep rising for longer to prevent higher inflation from becoming entrenched, even if that slowed the U.S. economy.

Signs of a rapidly deteriorating U.S. economic outlook have spurred bond traders to pencil in a complete policy turnaround by the Federal Reserve in the coming year, with interest-rate cuts in the middle of 2023.