MNI BRIEF: Fed's George - Terminal Rate May Have To Be Higher

Kansas City Fed President Esther George said Friday the terminal fed funds rate may have to be higher and stay there longer, but she is more cautious than others about how quickly to raise rates to get to that point.

George said she is concerned with the supersized steps that will take time to work their way through the economy, but a higher savings buffer suggests the central bank may have to raise rates to a higher peak than would otherwise be the case. "I am more cautious than most," she said about the Fed's hiking pace. "I'd prefer a steadier path." Markets widely expect a fourth 75 basis point increase to take the fed fed rate to a 3.75%-4% range at next month's FOMC meeting. The most hawkish forecasts from officials last month had the terminal rate at 4.75%-5%.

The labor market is still "unusually tight" despite a decrease in job openings and slower job growth, she said, adding her own forecast does not predict a recession. "Inflation is well above the Fed's target and my guess is we'll continue tightening even as we look around corners," she said at an S&P Global event. It could take another year inflation dynamics to change, Atlanta Fed economist Brent Meyer told MNI. (See: MNI INTERVIEW: Entrenched U.S. Inflation To Linger - Meyer)