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Outgoing Fed official urges not to reduce inflation

Consumers got good news about inflation when the latest government report showed the lowest growth rate in 12 months.

But that doesn’t mean that Federal Reserve policymakers are ready to cut interest rates.

Esther George, a graduate of Western Missouri State University, was a member of the influential Federal Open Market Committee, which charted a course of raising interest rates last year to bring down the highest rate of inflation in 40 years.

“I think it will take some time to hit the target of 2% long-term inflation,” said George, who is stepping down this month after 11 years as president of the Federal Reserve Bank of Kansas City. “We will need to see more progress on inflation easing. In the long run, it is very important for ordinary people to have the price stability they face.”

The US Bureau of Labor Statistics said consumer prices rose 6.5% in December, the lowest annual gain in more than a year. But George noted that prices remain stubbornly high in certain areas: in rental housing and in the service sector in general. In December, rental prices rose 8.3% nationwide and 7% in the Midwest.

This suggests that the Federal Open Market Committee, which meets in late January, may support rate hikes in 2023. The minutes of the central bank’s December meeting show that policymakers remain committed to fighting inflation and expect higher interest rates to remain in place.

The base federal funds rate is set at 4.25% to 4.5% after a half-percentage hike in December.

George, who gave the committee a hawkish inflation outlook, believes the rate-setting group will come to a consensus that aims to protect the economy from a recession but makes long-term price stability a priority.

“Of course everyone wants a soft landing,” she said. “The Federal Reserve is very focused on saying that we know what the challenge is before us, and that is to bring inflation down.”

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