Federal Reserve Officials Turn Hawkish: Inflation Risk Rises, Further Rate Hikes Not Ruled Out

BlockBeats News, May 7th, as the Iran conflict continues to drive up oil prices and supply chain pressures, several Federal Reserve officials have warned that the U.S. inflation risk is re-emerging. Future interest rates may need to remain elevated for a prolonged period, with the possibility of further rate hikes.

St. Louis Fed President Mester stated that the current policy risks have clearly shifted towards inflation. Interest rates may need to remain unchanged "for a period of time" and could be raised further when necessary. He pointed out that the rising prices of key industrial inputs such as aluminum, helium, and diesel are driving broader cost pressures.

Chicago Fed President Evans warned that if high oil prices persist for several months, it will gradually impact the global supply chain and may reproduce the inflation transmission path seen during the pandemic. He stated that it is not yet "stagflation," but if the situation persists, it will become "increasingly tense."

Data shows that the average price of gasoline in the U.S. has risen to over $4.50 per gallon, and the New York Fed's Global Supply Chain Pressure Index has reached its highest level since July 2022. The market currently widely expects that the Fed's room for rate cuts in the next year is limited.

The latest PCE data shows that U.S. March inflation has reaccelerated to 3.5% year-on-year, with core PCE rising to 3.2%. Internally, the Federal Reserve is gradually accepting the possibility of "re-tightening when necessary."