Bringing down inflation will take time, more rate hikes: Fed officials

WASHINGTON, United States — The United States will require further interest rate hikes in order to cool the world's largest economy and rein in high prices, Federal Reserve Governor Lisa Cook said Thursday.

As US annual inflation has soared to the fastest in 40 years, the Fed has moved aggressively this year to tamp down demand, raising the interest rates five times, for a total of three percentage points.

And the central bank has said more increases are likely to come this year.

"Inflation remains stubbornly and unacceptably high, and data over the past few months show that inflationary pressures remain broad-based," Cook said in her first speech as a member of the US central bank's board.

Prices have surged over the past year, partly due to global supply chain problems that created shortages of key parts such as semiconductors needed for cars and electronics, as well as a shortage of workers.

The situation was exacerbated with Russia's invasion of Ukraine in February -- spurring a surge in energy prices and affecting global food markets -- along with China's adherence to a strict zero-Covid policy.

While the Fed cannot act directly on supply, it can moderate demand by tightening monetary policy, Cook said in the appearance at the Peterson Institute for International Economics.

"We will keep at it until the job is done," she said.

No 'meaningful progress'

Her fellow Fed board member Christopher Waller warned that given ongoing price pressures, including from the US housing market, inflation is "not likely to fall quickly."

"We haven't yet made meaningful progress on inflation, and until that progress is both meaningful and persistent, I support continued rate increases," Waller said in a speech Thursday.

Both officials expressed concern about the widespread and persistent forces pushing up prices and said the Fed must remain focused on that threat.

"Restoring price stability likely will require ongoing rate hikes and then keeping policy restrictive for some time until we are confident that inflation is firmly on the path toward our two percent goal," Cook said.

Waller said that in addition to likely increases in November and December, "I anticipate additional rate hikes into early next year."

He also downplayed speculation that sharp movements in financial markets might cause the Fed to ease off its aggressive stance.

"This is not something I’m considering or believe to be a very likely development," he said, noting that "markets are operating effectively" and the Fed has tools to address any strains.