Fed Officials Show Willingness to Raise Rates Again This Year

By Bradley Olson and Brian Blackstone Features Dow Jones Newswires

A trio of Federal Reserve officials on Friday expressed openness to raising short-term interest rates again before year's end, without committing to a move.

Continue Reading Below

Federal Reserve Bank of Dallas President Robert Kaplan, speaking at an energy conference here, said he might support an increase at the Fed's December policy meeting, but he wants to watch how the economy performs for a while before making a decision.

"I've got an open mind about December, but I want to take a little bit more time" to observe the economic data, said Mr. Kaplan, who is a voting member this year of the Fed's rate-setting Federal Open Market Committee. He supported the Fed's two rate increases in March and June, but said during the summer he wanted to see more evidence of firming inflation before raising rates again.

Addressing the same conference earlier in the day, Kansas City Fed President Esther George, a frequent backer of higher rates, said she continues to support lifting borrowing costs along a "gradual path" but didn't specify when she wants to move next.

San Francisco Fed President John Williams told reporters in Zurich early Friday he also supports gradual rate rises, and this could include another increase by year's end and around three moves next year, if the economy evolves as he expects. That would be in line with projections released by Fed officials Wednesday after a two-day policy meeting.

The officials' remarks were the first public comments from Fed policy makers other than Chairwoman Janet Yellen since the meeting. During a press conference Wednesday, she indicated the Fed's anticipated rate path reflects its upbeat view about the economy at a time of low unemployment, moderate growth and subdued inflation. "The basic message here is U.S. economic performance has been good," she said.

Continue Reading Below

Although U.S. unemployment is near a 16-year low, several Fed officials have continued to express concerns about soft inflation, which can serve as a barometer of economic strength. The Fed's preferred annual inflation gauge, excluding volatile food and energy categories, was at 1.4% in July, down from 1.9% in January and below the central bank's 2% target.

Last week, a different inflation measure showed consumer prices climbed 1.9% in August from a year earlier, a move up after months of slower showings. Economists expect inflation to rise in the months ahead, propelled by higher gasoline prices due to Hurricanes Harvey and Irma.

But policy makers view such data cautiously given the volatility of energy prices.

"I'm confident that the cyclical inflation pressures are building," Mr. Kaplan said at a conference held by the Federal Reserve Banks of Kansas City and Dallas.

Those pressures are being offset by structural economic changes tied to technological advances, he said.

"I want to see how these two conflicting forces play out," he said.

Mr. Williams said he, like many of his colleagues, still expects inflation to rise to the 2% target over the next two years.

"I feel that with a strong economy, history repeats, and inflation tends to move up even if there are some, you know, noise in the data...at any given point in time," he said. "So, again, I'm feeling very good about the U.S. economy."

Write to Bradley Olson at Bradley.Olson@wsj.com and Brian Blackstone at brian.blackstone@wsj.com

(END) Dow Jones Newswires

September 22, 2017 16:48 ET (20:48 GMT)