The case for a half-point interest rate increase at the Federal Reserve’s next policy meeting in May has grown, according to Mary Daly, president of the US central bank’s San Francisco branch, in the latest sign that it is readying aggressive moves to root out high inflation.
Daly joins an expanding group of Fed officials who have jettisoned a gradual approach to scaling back support for the economy in the aftermath of the pandemic-induced recession. They have embraced a more rapid withdrawal as the labour market has bounded back and price pressures have become far-reaching.
Support has coalesced in recent weeks for interest rates to rise to a “neutral” level that neither aids nor constrains growth, and to get there more quickly than initially expected by moving in larger increments than the quarter-point rate increase delivered in March. That entails resurrecting a tool last used more than two decades ago and raising rates by half a percentage point at one or more meetings this year.