Fed leaders pledge tough fight to keep inflation credibility

Abstract

Federal Reserve leaders pledged the central bank would continue an aggressive fight to cool an inflation rate that's at a four-decade high, even if higher rates cause the risk of recession. Fed Bank St. Louis 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 and Minneapolis counterparts - Thomas Barkin and Neel Kashkari - said the central bank was committed to lowering inflation and a recession could happen. San Francisco's Mary Daly maintained that the central bank can counter inflation without triggering mass unemployment and an economic downturn. "I've argued now with the hotter inflation numbers in the spring, we should get to 3.75% to 4% this year. Exactly whether you want to do that at a particular meeting or some other meeting is a great question. I've liked front-loading. I think it enhances our inflation-fighting credentials."Federal Reserve presidents speaking this week emphasized that inflation at a 40-year high has yet to slow, and pushed back against the perception the central bank was pivoting to a less aggressive phase of tightening monetary policy. Fed Chair Jerome Powell last week cited Federal Open Market Committee forecasts that the Fed would raise rates to 3.4% at the end of the year and 3.8% in 2023."We're going to have to see convincing evidence across the board of headline and other measures of core inflation all coming down convincingly before we'll be able to feel like we're doing enough," Bullard said. Speaking at an event in New York, Minneapolis chief Kashkari said that the Fed is "Laser-focused" on containing inflation, and whether the economy is in a recession or not doesn't change that. Asked about whether the Fed can achieve a so-called soft landing, where rate increases curb price growth without triggering a recession, he said: "I think it's possible, but I don't know how likely it is. And we'll do everything we can to try to achieve it. But we have to get inflation back."