Fed officials stress not jamming brakes on economy as hikes loom

U.S. Federal Reserve officials said they want to avoiding unnecessarily disrupting the U.S. economy as they prepare to start raising interest rates, showing little stomach for an aggressive 50 basis-point move in March.

Federal Reserve officials said they want to avoiding unnecessarily disrupting the U.S. economy as they prepare to start raising interest rates, showing little stomach for an aggressive 50 basis-point move in March.

Chair Jerome Powell declared last week that officials were ready to raise rates at their next meeting to curb the strongest inflation in four decades. But he declined to give specific guidance on the policy path, apart from saying that support should be removed steadily and policy had to be nimble in responding to incoming economic data.

His reticence has opened the door to hiking at every meeting this year if needed. But Powell went out of his way to indicate that officials had not made up their minds and his colleagues on Monday echoed that caution, with four making public remarks.

“You always want to go gradually, in the economy. It is in no one’s interest to try to upset the economy with unexpected adjustments,” Kansas City Fed President Esther George told the Economic Club of Indiana. “But I do think the Federal Reserve is going to have to move deliberately in its decisions to begin to withdraw accommodation.” George, one of the central bank’s more hawkish officials, is a policy voter this year.

Investors have raised bets on the pace of increases since Powell spoke, shifting to roughly five this year versus the three that officials forecast in December. But Wall Street economists have split over how time the Fed will act, penciling in as many as seven hikes as well as the risk that officials lift rates by 50 basis points -- the first increase of that magnitude since 2000 -- to keep price pressures at bay.