U.S. Fed Hawks "Cannot Rule Out Interest Rate Hike" Ahead of Kevin Warsh's Inauguration

U.S. Fed Hawks "Cannot Rule Out Interest Rate Hike" Ahead of Kevin Warsh's Inauguration

Minneapolis Fed President: "Serious about tackling inflation... New Fed Chair only casts one vote out of 12"

Boston Fed President: "Pay close attention to upward inflation risks... Don't rule out tightening scenarios either"

As U.S. price indicators showed a rise exceeding expectations, key officials of the Federal Reserve (Fed) also expressed vigilance on the 13th (local time) regarding the escalating risk of inflation.

According to Bloomberg, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said at a public event hosted by a local chamber of commerce that while the U.S. labor market has shown some improvement compared to the beginning of this year, inflation has worsened due to the war with Iran.

He reaffirmed his previous stance that the possibility of an interest rate hike should remain open, stating, "We are really serious about our mission to bring inflation back down."

Kashkari was one of three regional Fed presidents who voted in favor of freezing interest rates at the Federal Open Market Committee (FOMC) meeting on April 29, but opposed the inclusion of the phrase 'easing bias' in the policy statement.

In a statement on May 1, he had stated, "The FOMC should signal a policy outlook that the next change in interest rates could be either a cut or a hike, depending on how the economy evolves."

Regarding whether Chairman-designate Kevin Warsh, who is expected to take office as the new Fed Chair as early as this week, will cut interest rates as demanded by President Trump, he said, "While the Fed Chair has considerable influence and sets the agenda, they are just one of 12 voters in interest rate decisions. Whoever becomes Chair, and under whatever circumstances, the new Chair will have to persuade their fellow committee members that the agenda they set is the best course of action."

Susan Collins, President of the Boston Fed, also stated that the Fed might have to raise interest rates if inflationary pressures do not ease.

In a speech at the Boston Economic Club today, President Collins said that the likelihood of the Middle East conflict not being resolved soon and a more unfavorable scenario unfolding has increased, adding, "Extraordinary vigilance is needed regarding the upside risks to inflation."

Regarding the monetary policy outlook, she commented, "My patience has dwindled for simply overlooking another supply shock due to inflation persistently exceeding the target (2%) for more than five years."

She continued, "While I hope that monetary policy normalization can resume later this year, I cannot rule out scenarios where some policy tightening may be necessary to ensure inflation sustainably returns to 2%," not closing the door on the possibility of an interest rate hike.

Meanwhile, the U.S. Federal Senate today approved the nomination of Kevin Warsh as the next Fed Chair.

The Fed Chair's term is four years, and current Chair Powell's term ends on the 15th. Warsh is expected to be inaugurated as the new Fed Chair as early as this week.