US Fed official says rate hikes may be needed if inflation surges

TDT | Washington

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A key US Federal Reserve official warned yesterday that a series of interest rate hikes could be needed if price shocks from the Middle East war are larger than expected, fuelling inflation.

"Federal funds rate increases, potentially a series of them, could be warranted, even at the risk of further weakness to the labor market," Minneapolis Fed President Neel Kashkari said, explaining his dissent to the central bank's overall decision this week.

A bigger price shock could cause public expectations of inflation to shift, and the Fed would need to act against it, he believes.

Kashkari was among four officials who voted against the Fed's statement Wednesday after a two-day policy meeting. There are 12 voting members on the bank's rate-setting committee.

Like him, two other regional Fed presidents, Beth Hammack and Lorie Logan, supported the decision to hold rates steady but not the bank's signal that another cut was the next likeliest move.

Hammack and Logan cited risks of steeper inflation too in separate statements defending their decisions.

Fed governor Stephen Miran, however, continued pushing for lower interest rates.

This was the highest number of dissents since October 1992, highlighting the challenges that Fed Chair Jerome Powell's expected successor, Kevin Warsh, will face if he is confirmed.