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MNI INTERVIEW: Lagging Fed May Need 75BP Hikes To Catch Up

(MNI) Washington

Neutral may not be the end game, says LSE's Ricardo Reis, academic consultant to Fed and other central banks.

U.S. inflation has gotten so far out of the Federal Reserve’s reach that more extreme steps like interest rate increases of 75 basis points and pushing the federal funds rate above levels currently considered neutral may become necessary, Ricardo Reis, an academic consultant to the Fed system, told MNI’s FedSpeak Podcast.

Price expectations are at serious risk of becoming unanchored as businesses and workers start to factor inflation prospects over longer-term horizons, said Reis, a professor at the London School of Economics who also advises the Bank of England and the Riksbank.

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U.S. inflation has gotten so far out of the Federal Reserve’s reach that more extreme steps like interest rate increases of 75 basis points and pushing the federal funds rate above levels currently considered neutral may become necessary, Ricardo Reis, an academic consultant to the Fed system, told MNI’s FedSpeak Podcast.

Price expectations are at serious risk of becoming unanchored as businesses and workers start to factor inflation prospects over longer-term horizons, said Reis, a professor at the London School of Economics who also advises the Bank of England and the Riksbank.

Keep reading...Show less