Kansas City Fed President Esther George said in a CNBC interview that she has raised her forecast on interest rate to over 5%. Also, “I see staying there for some time, again, until we get the signals that inflation is really convincingly starting to fall back toward our 2% goal”. Interest rate will stay above 5% well into 2024.
“Where we really see the persistence in that inflation seems to be in the non-housing part of the services side of the economy,” George said. “So, I think that’s going to be where I’ll be watching for the real clues to see whether we are getting traction with our policy in that area.”
“I’m not forecasting a recession, but I’m quite realistic that when you see below-trend growth — and the idea that our instrument is going to work on demand, bringing that down — it doesn’t leave a lot of margin there,” George said. “Not my forecast, but I do understand that bringing demand down creates that sort of possibility.”