Federal Reserve officials cannot raise interest rates just once this fall and then leaving them steady, the central bank’s vice president warned Tuesday.
Stanley Fischer’s comments, delivered on Bloomberg TV, served as a pushback to the idea put forward by some members of the Fed that economic conditions will only justify a single 0.25 percent rate hike in the years ahead, and that if the Fed tightens money any faster it could choke off economic growth.
“I don’t think you can say ‘one and done’ and that’s it,” Fischer said. “We choose the pace [of interest rate increases] on the basis of data that are coming in. So I don’t think we know at the time we start whether it’s one and done or several. It depends entirely on what’s happening in the economy.”
The Fed held interest rates close to zero from 2008 through 2015, and raised its target in December to between 0.25 percent and 0.5 percent.
Since then, however, a series of global events have slowed U.S. growth, and undermined Fed officials’ confidence that they will be able to raise rates the way they have in past crises.
Nevertheless, at a conference last week in Jackson Hole, Wyo., top officials including Fed Chairwoman Janet Yellen and Fischer suggested that they might move as soon as September to resume raising the short-term interest rate target. Fischer also hinted that more than one rate may be justified if the incoming economic data remains strong.
The U.S. economy, he stated, is “very close to full employment,” meaning that without interest rate increases, loose money could generate too-high inflation.
