MNI BRIEF: Fed's George Says Savings Likely Mean Higher Rates

Kansas City Fed President Esther George Tuesday said the large savings buffer Americans possess is likely to require higher interest rates to keep a lid on consumer spending.

"High savings is likely to provide momentum to consumption and require higher interest rates," she said in remarks at a conference held by the Central Bank of Chile, estimating Americans continue to hold on to USD2.3 trillion in excess savings relative to pre-pandemic levels. "This excess saving and the distribution of those savings is going to be a key factor I think shaping the outlook for output for inflation and certainly for interest rates." (See: MNI INTERVIEW: Fed's Barkin-Prices May Force Higher Rates Peak)

George, in remarks that focused on the distributional consequences of monetary policy, also said US house prices remain 25% above their pre-pandemic trend and while largely an issue of supply one can argue it is in part due to the magnitude and duration of quantitative easing.