When the Fed does move to raise rates the increase will be smaller than many have been predicting.

WASHINGTON–Officials with the Federal Reserve have begun pushing back on the prediction by some that it will raise interest rates prior to its March meeting, and further making it clear that when the Fed does move to raise rates the increase will be smaller than many have been predicting.




“Markets began to bet on a double-size rate increase — half a percentage point — after January inflation data came in surprisingly high last week,” noted the New York Times. “Those expectations grew after the Federal Reserve Bank of St. Louis president, James Bullard, suggested that the Fed might need to respond decisively with a large increase or even an inter-meeting move, something the central bank typically reserves for emergencies.”

But Bullard has since walked back those comments a bit, telling CNBC he is just one policy official and that Fed chair Jerome H. Powell will lead on deciding how quickly to pull back support. Bullard did reiterate that he would like to see a rapid pace of increases, taking rates to about 1% by July — but he did not repeat that an increase in between meetings might be a good idea, saying instead said the Fed needs to react to data in an “organized” way, the Times stated.

From the West Coast, Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said that the Fed needed to get moving, but that its approach ought to be “measured.”

“I see that it is obvious that we need to pull some of the accommodation out of the economy,” Daly told Face the Nation. “But history tells us with Fed policy that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability we’re trying to achieve.”

“Steady” Increases

Thomas Barkin, president of the Federal Reserve Bank of Richmond, similarly said in a SiriusXM interview that he favored raising rates “steadily.”

I think it’s timely to get started, and steadily move back toward prepandemic levels,” Barkin was quoted as saying.

He noted that while the Fed carried out its rate moves, it would get a better handle on whether inflation was beginning to settle down and could adjust the timing and pace of its moves accordingly, the Times added.