Bloomberg: The US is likely to experience higher inflation for some time, and the top economic job is to ease price growth and not cut rates too soon, the International Monetary Fund’s deputy chief said.

“We are in a period where inflation is likely to be high for a while, at least for another year or two,” IMF First Deputy Managing Director Gita Gopinath said in an interview on Bloomberg Television. “The economic priority is to bring down inflation and not prematurely loosen policy.”

In his keynote speech Friday, Fed Chair Jerome Powell warned that policy rates must rise and then stay high for some time, echoing a series of statements earlier in the day from his colleagues that rates must become restrictive until prices begin to cool.

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“What was great was that he came out as being firm and resolute about bringing inflation down to target, making sure inflation expectations don’t get de-anchored,” Gopinath said.

The IMF’s deputy said it’s too early to say that global inflation has peaked and that the fund is concerned about cost-of-living crises for lower-income nations spurred by high food and energy costs.

Economists, Fed officials and central bankers from around the world are in Jackson Hole, Wyoming, this week for an annual conference hosted by the Kansas City Fed. The US inflation rate is near the highest level in four decades, and Powell has conceded that the Fed’s earlier analysis was incorrect and policy makers should have begun raising interest rates sooner.

This year’s conference is being held in person for the first time since 2019.

(All times New York)

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Mester Says It’s Premature to Call CPI Peak (3:46 p.m.)
The Federal Reserve will keep rates higher until there is compelling evidence that inflation is easing, Cleveland Fed President Loretta Mester said, adding that it’s too soon to say whether price growth has peaked.

“It’s really premature to say inflation has peaked and that it’s on a downward trend,” she said in an interview on Yahoo! Finance. “We want it to be on a sustainable downward trend and I’m just going to need to see several more months of better inflation data to be able to even say that it’s peaked.”

She repeated comments made earlier in the day on Bloomberg Television, saying rates would likely have to move above 4% and stay there for some time to see price growth decelerate.

The Cleveland Fed chief says economic growth will likely be below trend at about 2% for the year, while the jobless rate may rise as interest rates increase.

Furman Says Fed Should Raise Inflation Goal (3:02 p.m.)
The Fed and other central banks should consider declaring victory on their price-stability goals once inflation returns to 3%, Harvard economics professor Jason Furman said Friday during the Fed’s annual conference in Jackson Hole, Wyoming.

“I think 2% inflation was too low a target. I don’t think anyone choosing a target from scratch in the year 2019 or the year 2022 would have picked a target of 2%, which gives so little room to respond to recessions by cutting the fed funds rate,” he said.

Many central banks, including the Fed, have adopted a 2% inflation target in recent decades. Furman said they should stick to that for now, but consider changing it down the road as extraordinary inflationary pressures currently gripping much of the world recede.

“If we live with three, four, five years of 3% inflation, is the public going to start to become ‘rationally inattentive’ again? Are people going to calm down about inflation? Is the cost of getting inflation from 3 to 2 going to look incredibly high? Are the benefits of getting inflation from 3 to 2 look low, and possibly even negative?” Furman said.

“Ultimately, it is what the central banks want it to be, and I hope you all want it to be 2% firmly and loudly for some period of time. But then when people stop paying attention again, I won’t view a declaration of victory at a stable, 3% inflation rate as premature. I would actually view it as a good thing.”

Kashkari Says Inflation Is ‘Raging Inferno’ (2:51 p.m.)
Minneapolis Fed President Neel Kashkari told the conference that the current inflationary environment isn’t a result of “running the economy hot.”

“I want to push back on your conclusion that ‘running the economy hot’ entails significant risks,” Kashkari said to IMF First Deputy Managing Director Gita Gopinath, who made the assertion as a panel participant. Kashkari spoke from the audience during the ensuing question-and-answer session.

“Prior to the pandemic, a lot of us had these debates — benefits to workers, et cetera. This is not what we had in mind when we talked about running the economy hot,” Kashkari said. “This is a raging inferno. And so, I think a raging inferno entails significant risks. But my conclusion from this is not, well, we need to go back to the old way, and imagine that inflation is around every corner, and we need to get ahead of every one of those, what I used to call, ‘ghost stories’.”

Gopinath, the IMF’s No. 2 official, responded that “there is a real chance that we go back to a world of low real interest rates, at the zero lower bound, secular stagnation and so on.”

“In that world, the idea of running the economy hot, a bit of overshooting, worrying more about inflation de-anchoring to the downside” makes “complete sense,” Gopinath said. “The point I was making was that, especially what this episode has shown us is the gap between going from hot to being an inferno may be very small.”

Mester Favors Hiking Above 4% and Holding (11:55 a.m.)
Cleveland Federal Reserve President Loretta Mester said the US central bank was “all in” against inflation and she favors raising interest rates above 4% early next year and hold there to curb price pressures.

“I think we’re going to have to move them up — and this is based on my current read of the data — above 4% and probably need to hold them there next year,” Mester said in an interview with Bloomberg Television. “So in other words, move them up to slightly above 4% some time early next year, and then just keep them there in order to get this inflation under control.”

US Stuck in Slow Growth as It Exits Pandemic (11:55 a.m.)
The US economy remains stuck on a path of slow growth as it exits the pandemic, with productivity gains from working from home offset by losses elsewhere, according to a paper presented to the Federal Reserve’s annual Jackson Hole symposium.

“Our modal forecast is that longer-run GDP growth — say 5 to 10 years out — is likely to remain between 1.5% and 1.75%,” Federal Reserve Bank of San Francisco economists John Fernald and Huiyu Li wrote in the paper presented Friday.

Hours Worked Is Key for Policy, Paper Says (11:05 a.m.)
The number of hours worked per employee is at least as important a data point for policy makers as the employment rate, because it’s a barometer of who’s entering the workforce, according to a research paper presented to policy makers at Jackson Hole.

The findings in the paper are relevant for central banks as they project labor-market dynamics into the future when assessing and implementing policy, the authors said.

Powell Punctuates Fed Colleagues’ Warnings (10:36 a.m.)
Powell capped a series of warnings from his colleagues that the US central bank needs to keep raising interest rates and leave them elevated for a while to stamp out inflation.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said Friday in Jackson Hole, Wyoming. “The historical record cautions strongly against prematurely loosening policy.”

Bostic Joins Chorus for Holding High Rates (9:58 a.m.)
The Federal Reserve should keep interest rates higher “for a long time,” said Atlanta Fed President Raphael Bostic, echoing sentiments Friday from his colleagues.

The main concern is inflation, rather than the labor market, and policy makers should be willing to see jobs numbers moderate, Bostic said in an interview with Bloomberg Television.

Philadelphia Fed President Patrick Harker said earlier in the day that rates “should stay up there,” while St. Louis Fed President James Bullard said rates must “get up there.”

Speaking earlier with CNBC, Bostic said he sees a “restrictive” range for rates at 3.5% to 3.75% range.

Bullard Says Rates Working With Shorter Lags (9:40 a.m.)
The Federal Reserve’s rate hikes are working at shorter lags than in the past, said St. Louis Fed President James Bullard.

Markets are moving “very quickly in response to projected paths of policy,” Bullard said in an interview with Bloomberg Television, pointing to the slowdown in the housing market.

Bullard reiterated he favors rates hitting 3.75% to 4% by year-end. “We have got to get the rate up,” he said. He added the Fed should revise its so-called dot-plot of rate forecasts to a shorter time frame, rather than looking three years out.

Harker Says Rates Should ‘Stay Up There’ (9:20 a.m.)
The Federal Reserve should consider pausing rate hikes after hitting at least 3.4% by year end to see how the economy reacts, said Philadelphia Fed President Patrick Harker.

“We don’t have to keep climbing, climbing, climbing and then go down very quickly,” Harker said in an interview with Bloomberg Television on Friday. “Let’s stay up there and let the economy do its thing,” adding that core inflation is the key metric to watch.

“We need to move methodically toward a clearly restrictive stance, which we’re doing,” Harker said. That rate is around 3.4% to 3.5%, he said.

While saying there’s “still a path to do this” without a recession, which isn’t in his forecast, any downturn would be “short and shallow.”

Bostic Leaning Toward Favoring Half-Point Hike (8:52 a.m.)
Atlanta Fed President Raphael Bostic said he’s leaning toward favoring a 50-basis-point hike at the Fed’s next meeting in September, adding that the US economy is starting to respond to policy but interest rates need to move toward “restrictive” territory.

“Restrictive is somewhere in the 3.5% to 3.75% range, and I am hopeful we will get there by the end of the year,” Bostic said in an interview on CNBC on Friday.

Bostic, who isn’t a voter on interest rates this year, said he’s seeing “positive signs” in the economy. He spoke after data showed the core personal consumption expenditures price index in July, a key Fed indicator, rose a slower-than-expected 0.1% from the previous month.