A key U.S. central bank official has said that she backs higher interest rates to curb inflation, in a signal that she could push back on a decision to keep rates unchanged this month.
“I currently believe modestly higher interest rates would better balance the outlook and risks” for the Federal Reserve, said Dallas Fed President Lorie Logan in Houston.
The Fed’s rate-setting committee is next set to gather on July 28-29, and Logan is one of its 12 voting members.
She noted that inflation has been above the Fed’s two-percent target for more than five years, straining the budgets of households and businesses.
Even as the consumer price index cooled from 4.2 percent in May to 3.5 percent in June, Logan stressed that “one month of relief is not enough.”
“It is time to finish the job of restoring price stability,” she added. “In monetary policy as in hockey, you have to skate where the puck is going.”
The Fed has a dual mandate of price stability and maximum employment and tends to keep rates higher to tackle inflation while cutting them to boost the jobs market.
For now, Logan said, “inflation has been too high, for too long, and does not appear to be on track all the way to our two percent target.”
While there are risks that inflation could rise further, the labor market appears solid, giving the Fed room to act.
U.S. inflation has surged on the back of higher oil prices this year, after U.S.-Israel strikes targeting Iran sparked Tehran’s retaliation in blocking almost all access to the Strait of Hormuz.
