Federal Reserve Banker: Interest rates must rise above five percent

“We’re not at five percent yet, we’re not over five percent, which I think will be necessary given my economic forecasts,” Mester said in an interview with the Associated Press published on Wednesday. “I just think we have to move on and we will discuss at the meeting how much needs to be done,” said Mester. The current key interest rate has been in a range between 4.25 and 4.50 percent since a half-point increase in December.

“Financial markets are currently assuming that the Fed will decide at its next meeting on January 31st and February 1st to raise interest rates by only a quarter of a percentage point, as inflation now seems to have already passed its peak. “It “There are good signs that things are moving in the right direction,” Mester said. She did not say how big a rate hike she favors at the upcoming rate meeting.

Raise interest rates “as soon as possible”.

Meanwhile, fellow Fed James Bullard, chairman of the St. Louis branch of the Fed, said the Fed should raise interest rates above 5 percent “as soon as possible” before pausing rate hikes. At a Wall Street Journal event on Wednesday, when asked if he was open to another 0.50 percentage point rate hike, he said, “Why not go where we’re supposed to go? Why hold off?” He believed that the approach of bringing forward rate hikes by larger increments of three-quarters and a half percentage point worked well. He sees no reason to stop doing so until interest rates are closer to what can be seen as a likely endpoint.

In their interest rate outlook from December, the Fed leaders had estimated an average key interest rate of 5.1 percent for the end of 2023. Recently, Fed representatives had shown themselves open to considering a smaller rate hike of 0.25 percentage points at the upcoming meeting.