KANSAS CITY, Mo. — Federal Reserve Bank of Kansas City President Esther George wants to see the U.S. central bank start raising short-term interest rates at some point during the summer, worrying that if Fed doesn’t get moving soon future rate increases may have to be more aggressive.
“I continue to support liftoff toward the middle of this year due to improvement in the labor market, expectations of firmer inflation, and the balance of risks over the medium and longer run,” George said in a speech.
“Waiting until economic conditions are nearly back to normal before raising rates may put policy behind the curve and require rates to rise rapidly in the future,” she said. The official noted that when the Fed does begin raising rates, it won’t be on “autopilot” and that subsequent decisions will be determined by the economy’s performance.
George spoke as central bankers actively debate the timing of when to raise the short-term interest rate target from its current level near zero, where it has been since the end of 2008. Most central bankers say they support boosting rates this year in light of decent growth and solid gains in the job market. Giving pause to the press for higher rates has been pervasive weakness in inflation: The Fed has fallen short of its 2 percent inflation target.
A number of officials have said the door to rate increases will open with the June meeting, although few have said they would like to see the Fed act at any given meeting. St. Louis Fed President James Bullard warned in an interview last week that if rate increases haven’t started by the end of the third quarter, the Fed may have waited too long.
