NY Fed president sees no need for 'big' rate hike in March

WASHINGTON - With high inflation hitting the US economy, it is time for the central bank to raise the benchmark borrowing rate, but there is no reason for a "big" early move, a top Federal Reserve official said Friday.

Instead, policymakers can "move steadily" to get the key lending rate off zero and back to more normal levels over the next year or more, New York Federal Reserve Bank President John Williams told reporters.

His comment downplayed expectations among many economists and investors that the Fed could move aggressively to raise interest rates by a half point in March to combat inflation, rather than its usual quarter-point increase.

"There's no need to do something extra at the beginning of the process of liftoff," Williams said in response to a question from AFP. "I don't see any compelling argument to take a big step" to start the process.

US inflation has hit the highest rate in four decades, battering President Joe Biden's popularity and striking households and businesses in the world's largest economy.

Williams acknowledged prices rose higher and lingered longer than he was expecting, and left the door open to more aggressive action if the situation demands it.

"What I'm trying to convey is that we'll be moving in a series of steps" to get the policy rate up from zero to "more normal levels" of 2-2.5 percent.

The official, who serves as vice chair of the policy-setting Federal Open Market Committee (FOMC), said the central bank could "either slow down or move faster. But I don't see the need to do that at the beginning."

His stance runs counter to others, like St. Louis Fed President James Bullard, who has called for the central bank to "front-load" its rate increases, and would be open to hiking outside the regularly scheduled meetings.

AFP