A growing number of Federal Reserve (Fed) officials are advocating for higher interest rates, with some suggesting a hike should have occurred at the recent meeting. On 6/8, St. Louis Fed President Alberto Musalem stated at an event in Brazil that the central bank should have increased rates a week prior. "The benchmark interest rate is the primary tool for conducting monetary policy, and at the meeting, I expressed my view in favor of a 25 basis point hike," Musalem said.

Musalem believes inflation is likely to remain well above the Fed's 2% target for about one year if monetary policy stays unchanged. He noted the US economy has shown strong resilience, with a stable labor market and robust job growth. Musalem argued for immediate action, stating that "gradual interest rate increases early on would be less disruptive and less costly than a stronger adjustment later." Although he supports rate hikes, Musalem is not a voting member of the Federal Open Market Committee (FOMC) this year; only 12 FOMC members vote on interest rates at each meeting.

At the 29/7 meeting, the Fed kept the benchmark interest rate at 3,5-3,75%. However, three officials dissented from the general decision, advocating for a 25 basis point (0,25%) rate hike: Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed President Neel Kashkari.

On CNBC on 5/8, Kashkari reiterated his stance, arguing that a rate hike was necessary to cool inflation. "Corporate profits are high. Consumers are still spending. The labor market is also stable. I don't see any evidence that monetary policy is tightening," he explained.

Other Fed officials have also voiced similar sentiments in recent days, suggesting the central bank should have raised interest rates last week, needs future adjustments, or is prepared to do so if inflation does not cool down. Fed Governor Lisa Cook said she is open to the possibility that the Fed may need to raise interest rates to address "too high" inflation in the US. "If inflation doesn't start to cool, I'm prepared to raise rates when necessary," she stated at an event in Alaska. At last week's meeting, Cook voted to keep rates unchanged.

Cook noted that the Fed is running out of policy space to cool inflation, as the index has exceeded its target for over five years. Last month, the personal consumption expenditures (PCE) price index – the Fed's preferred inflation gauge – was 3,7%.

Many other officials, such as New York Fed President John Williams and Philadelphia Fed President Anna Paulson, have signaled similar views. However, unlike Kashkari, Paulson told CNBC that current interest rates have a "slightly tightening" effect on the economy. Therefore, she supported keeping rates unchanged at last week's meeting to continue evaluating economic data.

Meanwhile, Fed President Kevin Warsh offered little guidance on the next policy steps and did not share much about his decision-making process. He believes financial markets need to assess the monetary policy outlook themselves.

Ha Thu (according to Reuters, CNBC)