Fed’s Willing to Hike Rates if “Data Indicate Progress on Inflation Has Stalled or Reversed”

By Wolf Richter for WOLF STREET

The first three months of the year have produced a nasty re-acceleration of inflation in the US. It was across the board: in the Consumer Price Index, in the Fed-favored PCE price index, in the Producer Price Index, in the quarterly Employment Cost Index (for two quarters in a row). The Fed is beginning to adjust to this new scenario, and a rate hike — instead of rate cuts — is now back on the table and keeps getting talked about.

Even – or especially? – after looking at the results of the jobs report on Friday, Fed Governor Michelle Bowman said in a speech that she remains “willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed.” This parallels what Powell said more softly at the FOMC post-meeting press conference. No disagreement there.