Why Some Economists Want Fed Chair Warsh to Hike Rates Today
Some economists want Federal Reserve Chair Kevin Warsh to raise interest rates at today's meeting. They argue the central bank's 2025 cuts left policy too loose, even as inflation sits above target.
Joe Lavorgna makes that case directly. He serves as chief economist for the Americas at SMBC Nikko Securities America. Lavorgna says the Fed should reverse part of last year's easing now that the labor market has stabilized.
The Case for a Hike
Lavorgna points to core Personal Consumption Expenditures (PCE) inflation, the Fed's preferred gauge. It has held more than a percentage point above the 2% target for years.
He argues policy isn't tight anywhere except housing, and that sector makes up only about 3% of the economy, in his view.
Lavorgna also expects the neutral rate, or r-star, to climb. Artificial intelligence-driven capital spending is lifting demand for credit, he says, which makes current rates look less restrictive than policymakers assume. Dallas Fed President Lorie Logan has echoed that hawkish tilt.
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