San Francisco Frontiers - US Fed official says rate hikes may be needed if inflation surges

"Federal funds rate increases, potentially a series of them, could be warranted, even at the risk of further weakness to the labor market," Minneapolis Fed President Neel Kashkari said, explaining his dissent to the central bank's overall decision this week.

Kashkari was among four officials who voted against the Fed's statement Wednesday after a two-day policy meeting. There are 12 voting members on the bank rate-setting committee.

Like him, two other regional Fed presidents, Beth Hammack and Lorie Logan, supported the decision to hold rates steady but not the bank's signal that a rate cut was their next likeliest move.

Hammack, too, pointed to the risk of steeper inflation in defending her decision.

Fed governor Stephen Miran, however, continued pushing for lower interest rates.

This was the most number of dissents since October 1992, highlighting the challenges that Fed Chair Jerome Powell's expected successor, Kevin Warsh, will face if he is confirmed by lawmakers.

The rate-setting Federal Open Market Committee "should offer a policy outlook that signals that the next rate change could be either a cut or a hike, depending on how the economy evolves," Kashkari said on Friday.

He flagged risks from an extended closure of the Strait of Hormuz due to conflict in the Middle East, and the potential for more damage to energy and commodity infrastructure in the region.

Tehran has virtually blocked the waterway, a key route for energy and fertilizer shipments, after US-Israeli strikes since February 28.

This has caused a surge in oil prices, feeding into worries that inflation could be more persistent.

In a separate statement, Hammack of the Cleveland Fed said: "I dissented from the post-meeting statement because I did not believe it was appropriate to include an easing bias around the future path for monetary policy."

"Inflation pressures continue to be broad based, and rising oil prices present an additional source of inflationary pressure," she said.

President Donald Trump has made no secret of his wish for more interest rate cuts, slamming Powell repeatedly for not slashing them more aggressively.

As Trump steps up pressure on the independent institution, Powell announced Wednesday that he would stay on as Fed governor even after his term as chairman expires on May 15.

Powell can remain on the Fed's board of governors until 2028, and his decision sparked a wave of fresh criticism from the Trump administration.

W.Thompson--SFF