the Fed is expected to raise rates “quickly” this year

The U.S. central bank is expected to raise rates “rapidly” by the end of the year, after first two hikes in March and early May, to curb inflation, the president of the new branch said on Tuesday. Fed Yorker, John Williams.

“I expect the (Fed’s Monetary Policy Committee) to act quickly to bring key rates back to more normal levels this year,” or around 2-2.50%, the official said, at a conference in Germany of the Bundesbank and the National Association for Business Economics (NABE).

Rates are currently within a range of between 0.75% and 1%. The Fed had raised them by a quarter of a percentage point in mid-March, then by an additional half a percentage point on May 4, the first turn of the screw of this magnitude since 2000.

The monetary committee had estimated that other increases of half a percentage point would be “on the table at the next two meetings”, ie June 14-15 and July 26-27.

John Williams, voting member of this committee, expects 4% core PCE inflation for 2022, i.e. without taking food and energy prices into account.

The PCE inflation index is the one favored by the Fed, and was, in March, 5.2% over one year without food and energy, whose prices have soared since the start of the war. in Ukraine, and 6.6% taking into account all prices.

In 2023, core PCE inflation should “fall to around 2.5%”, still anticipates the president of the New York Fed, then “slow down further to return close to our long-term objective of 2% in 2024 “.

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According to him, the Fed has “the right tools to achieve (its) objectives”.

“In fact, we have an advantage over previous inflationary episodes: our monetary policy tools are particularly powerful in the very sectors where we see the greatest imbalances and signs of overheating, such as durable goods and housing,” he estimated.

Another measure of inflation, the CPI, for April will be released on Wednesday.

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