The Fed will continue raising rates to at least 4% come 'hell or high water,' former Fed vice chair says
- The Fed will raise rates to 4% come "hell or high water," according to former vice chair Richard Clarida.
- He told CNBC Friday that "failure is not an option" for Fed Chair Jerome Powell as he fights inflation.
The Federal Reserve will undoubtedly raise rates to 4% or higher as policymakers have no margin for error in their fight against inflation, according to former Fed Vice Chair Richard Clarida.
The central bank's resolve to get prices under control is clear, especially after Chairman Jerome Powell's hawkish speech at Jackson Hole last month, he told CNBC on Friday, noting that "failure is not an option."
The only question now is how high rates will go and for how long they will stay there, said Clarida, who is now managing director and global economic advisor at bond giant PIMCO.
"I think they're going to 4% hell or high water, if I had to put it into two boxes," he said. "They are data dependent, but that's why they're going to 4%. Inflation is way too high."
The fed funds rate currently sits at a target range of 2.25%-2.50%, and central bankers are widely expected to approve another 0.75-point increase at their September 20-21 meeting.
On Thursday, Powell reiterated the central bank's priority of bringing inflation back down, saying that the effort "will take some time and requires using our tools forcefully to bring demand and supply into better balance."
And until inflation comes down, Clarida also said the Fed will effectively have a single mandate, instead of its official dual mandate of price stability and maximum employment.
"The chair made clear: the Fed knows that if you squander price stability it's very hard to achieve and sustain maximum employment," he said. "So I think that they are data dependent, and the data says inflation is too high. So I think they're going at least to 4%."
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