Federal Reserve policymakers signaled Wednesday that they will press ahead with more interest rate hikes, with several backing a top policy rate of at least 5% even as inflation shows signs of reaching its breaking point. peak and economic activity is slowing.

“I just think we need to move on and we’ll discuss at the meeting how much to do,” Cleveland Fed President Loretta Mester said in an interview with the Associated Press.

The comments seemed to reflect a widely shared opinion among his fellow policymakers, most of whom as of December had set a policy rate of 5.00% to 5.25% for the next few months.

Mester said that, for his part, he expects the Fed’s benchmark rate to need to rise “a little more” than that, and stay there for some time to further curb inflation.

The Fed’s benchmark overnight loan rate is currently in a target range of 4.25% to 4.50%, and investors expect the Fed to raise that rate by a quarter of a percentage point by the end of its December 31 term. January to February 31. 1 meeting.

But slowing spending, inflation and manufacturing… all informed on wednesday – have helped stoke expectations that the Fed will end its current round of rate hikes sooner than Mester and most of his colleagues expect, with the policy rate just shy of 5%.

The central bank began raising borrowing costs last March, when the official interest rate was in the 0-0.25% range and inflation began to rise to 40-year highs, several times the target of the 2% from the Fed.

‘Why stop?’

Like Mester, St. Louis Fed President James Bullard, speaking to the Wall Street Journal beforeHe said he also sees the policy rate rising to the 5.25-5.50% range, adding that policymakers should raise it above 5% «as soon as we can.»

Several Fed officials have voiced support for slowing rate hikes to a quarter of a percentage point, after last year’s much faster pace of rate hikes of mostly 75 basis points and a half point.

Bullard expressed more impatience. When asked if he was open to a half percentage point hike at the next Fed meeting, he asked “why not go where we’re supposed to go? … Why stagnate?

The answer can be found in part in the latest “Beige Book” report released by the Fed on Wednesday. Compilation of survey data from central bank districts across the country showed that while prices continued to rise, the pace in most districts was reported to have slowed.

And while employment continued to grow at a “modest to moderate” pace across much of the country, with several Fed districts reporting modest economic growth, the New York Fed reporting a contraction in activity, four other districts reporting slowdowns or slight declines, and most expect little growth ahead.

Still, Fed policymakers say the mistake they don’t want to make is failing to beat inflation, only to have to raise rates even higher to get the job done later, as they did in the 1970s and 1980.

Even Philadelphia Fed President Patrick Harker, who is generally less aggressive than Mester or Bullard and wants the Fed to switch to quarter-point rate hikes going forward, see «some more» increases in borrowing costs before a break.

Dallas Fed President Lorie Logan also supports a slower rate hike rate ahead due to the uncertain landscape and the need to be flexible. But he also noted that the Fed may need to raise rates more than expected to keep financial conditions tight enough to push inflation down.

“I think we shouldn’t be looking at a maximum interest rate,” Logan said in Austin, Texas. He added that even once inflation convincingly heads to 2% and the Fed stops raising rates, the risks will be «two-sided» and that more rate hikes could be in the offing.

In an interview with Reuters on Wednesday, outgoing Kansas City Fed President Esther George said she felt rates would have to rise more than many of her colleagues anticipate, but she also would have been willing to move in increments. More smalls.

«People’s expectations about inflation are starting to go down,» George said, an observation based on conversations with contacts in his Midwestern district. «So I feel comfortable starting that downsizing process… I would love to do 25 years if I was there.»

George will retire just before the next Fed meeting and will not participate in it.

But he added, “we still have an upside risk to inflation. I don’t think it’s gotten to a point where I think it’s clearly falling. There are enough problems out there to say that we have to protect ourselves from them.”

Fed Chairman Jerome Powell, who tested positive for COVID-19 on Wednesday and is experiencing mild symptoms of the virus, said after last month’s policy meeting that the battle against inflation had not been won and more rate hikes would follow in 2023.