US Fed dissenters call for rate hikes on inflation

Two US Federal Reserve policymakers who dissented from this week's decision to keep interest rates unchanged said Friday that rate hikes were needed to prevent high inflation becoming entrenched.

The Fed held rates at 3.50-3.75 percent for its fifth straight meeting on Wednesday. Three of the 12 committee members dissented in favour of a quarter-percentage-point increase.

“Inflation has been too high for too long,” Cleveland Fed President Beth Hammack said in a statement. “The longer that high inflation persists, the more challenging and costly it can be to bring it back down.”

Minneapolis Fed President Neel Kashkari, who also dissented, said it was necessary to “tighten policy incrementally as we gather more data on the path of inflation and employment.”

“If inflation remains elevated, in my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary,” Kashkari said.

The Fed has not brought inflation back to its two-percent target for more than five years. The supplied material says inflation reached three-year highs after President Donald Trump's war on Iran began in March, as rising energy prices fed into other products.

Fed Chair Kevin Warsh has said since taking office in May that he is committed to the two-percent inflation target, but has not detailed how he thinks the central bank should reach it. Before taking office, Warsh expressed support for lower interest rates, in line with Trump's position.

The supplied material says markets reacted with concern after this week's Fed meeting, with 30-year Treasury bond yields rising to their highest levels since 2007.

Trump has demanded lower rates and has put pressure on the independent central bank, while Fed policymakers remain divided over how to respond to inflation.