Fed officials express rate hike sentiments for the remainder of 2023

Yahoo Finance Fed reporter Jennifer Schonberger discusses Fed officials’ rate hike outlooks amidst the banking crisis and regulation debate.

Video transcript

DAVE BRIGGS: Yahoo Finance Senior Reporter Jen Schoenberger here with the very latest. Jen, good to see you. What did we learn today?

JEN SCHOENBERGER: Good afternoon, Dave. Good to see you. Two Fed officials were in favor of raising rates a quarter percentage point last meeting despite the bank failures because inflation remains too high. Boston Fed President Susan Collins said raising rates by another 25 basis points was, quote, "appropriate" amid high inflation despite uncertainty from the impact of the bank crisis. Collins also said she anticipates raising rates another 25 basis points from the current range of 4.75% to 5% to a new range of 5% to 5.25% and holding there through the end of the year, though she said before the recent bank failures she was keen on raising rates higher than current projections.

Quote, "recent financial sector stress has increased the uncertainty around appropriate monetary policy." She goes on to say, recent developments will likely lead banks to take a somewhat more conservative outlook and tighten lending standards, thus contributing to slowing the economy and reducing inflationary pressures. These developments may partially offset the need for additional rate increases.

But Richmond Fed President Tom Barkin said in a speech in Richmond today that it's too early to know whether banks will tighten credit enough to slow the economy. He said he saw the banking system as resilient at the time of the last meeting and favored a 25 basis point hike noting, quote, "substantial inflationary pressure." Barkin still sees a range of potential outcomes as pretty wide.

He said if inflation persists, the Fed can react by raising rates even further. We also heard from Minneapolis Fed President Neel Kashkari this afternoon, who says it's unclear whether a credit crunch will result from these bank failures. And it's going to take time for these strains to work through the banking system. Back to you.

DAVE BRIGGS: We shall see in the months ahead. Jen Schonberger, thanks so much. Appreciate that.