Fed's George: Speed at which interest rates should rise an open question
11.07.2022, 14:32

Fed's George: Speed at which interest rates should rise an open question

Kansas City Fed President Esther George, who voted against the 75 basis points rate hike in June, argued on Monday that the pace of rate increases needs to be carefully balanced against the state of the economy, as reported by Reuters.

Key takeaways

"Speed at which interest rates should rise an open question, moving too fast risks oversteering."

Communicating the path for rates is far more consequential than the speed of policy change."

"Recession projections suggest to me that rapid rate hikes risk tightening faster than the economy and markets can adjust."

"Abrupt changes in rates could create strains in economy."

"Remarkable that there is growing discussion of recession risk just four months after Fed began raising rates."

"Transmission of policy to economy will be lagged and subject to considerable uncertainty, unclear how high rates will need to rise."

"Steady path of rate increases could improve market functioning and assist balance sheet runoff."

"GDP still 2.5% below pre-pandemic trend suggests pandemic did long-lasting damage to supply side, particularly service sector."

"Nature of inflation suggests tight economy rather than specific supply disruptions are driving prices."

"Raising short term rates faster than long-term rates adjust could invert yield curve, stress banks."

Market reaction

These comments don't seem to be having an impact on the greenback's valuation. As of writing, the US Dollar Index was up 1.05% on the day at 108.02.

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