Kansas City Federal Reserve Bank President Esther George, an inflation “hawk” who has been pushing the central bank to start raising rates, said in a speech Thursday in Oklahoma that with recent progress in jobs and the broader economy, “we would be wise to act modestly but act now.”
“Starting now to move rates up slowly and deliberately will allow the economy to adjust to a more-normal and, in my view, appropriate stance of monetary policy that will lead to long-term growth,” George said in prepared remarks.
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George is among a handful of influential inflation hawks – Dallas Fed Chair Richard Fisher is another -- who believe historically low interest rates will eventually lead to dangerous asset bubbles and runaway inflation.
“I view the considerable progress in labor markets and the relatively steady inflation rate as encouraging. However, keeping interest rates near zero to achieve still further progress toward labor market improvement and higher inflation is risky in my view,” George said.
“More data is always on its way, and waiting for clarity too often causes decisions to be persistently postponed,” she added.
Rates were widely expected to move higher in June, but a lackluster first quarter combined with growing financial turmoil overseas put a rate hike on hold until at least September, and probably longer.
In her prepared remarks, George made no specific reference to Greece’s current debt crisis or China’s tumbling stock market, but said “global economic concerns can pose unpredictable risks to our economy.”
The Fed members may not agree on the timing of interest rate hikes, but they do agree on the trajectory: a gradual increase over a lengthy period is universally preferred.