U.S. central bankers remain divided on inflation as a recurring problem requiring repeated rate hikes, Reuters reports.
Separate remarks from Federal Reserve Governor Lael Brainard and Richmond Fed President Thomas Barkin on the post-pandemic outlook reflected an emerging rift who all currently see the need to raise interest rates aggressively this year.
Brainard saw a series of interest rate hikes and a reduction in the Fed's massive bond holdings bringing inflation back down toward the Fed's 2% goal.
But once the economy moved beyond price pressures from pandemic-constrained supply and Russia's invasion of Ukraine, the economic picture could reset closer to pre-pandemic norms, Brainard added.
Barkin saw post-pandemic upward price pressures and inflation continue as supply chains become more resistant to potential disruptions and governments continue to spend on benefits for an aging population or defense. Labor constraints from slowing population growth could also add to these pressures.
He recommended a quicker rise of interest rates to a neutral level for the present. "The best short-term path for us is to move rapidly to the neutral range and then test whether pandemic-era inflation pressures are easing and how persistent inflation has become," he said
Persistent downward pressure on prices from an aging population, slow growth, and globalization forced the Fed to keep interest rates low, leading to low inflation for two decades before the pandemic.
