Kansas City Federal Reserve Bank President Esther George on Thursday said she has raised her forecast for the fed-funds rate to above 5% and expects it to stay there for some time as the central bank continues its fight against inflation.
In an interview with CNBC, George, who is set to retire by the end of the month, said she wasn’t forecasting a recession, but warned that the Fed’s efforts to bring down demand don’t leave a lot of room for error.
George said recent data showing falling price pressures were encouraging but didn’t change her interest rate outlook. She noted that “a lot of money is sitting on household balance sheets right now.”
To the extent that households hang on to that cash, it will make it easier for inflation to come down. But if that buffer of money is spent, policy makers will have a harder time getting inflation under control, she said.