Joe Lavorgna said the Federal Reserve will need to raise interest rates this year to combat persistent inflation [1, 2].
This prediction suggests that current monetary policies may be insufficient to stabilize prices, potentially leading to higher borrowing costs for consumers and businesses.
Lavorgna, who served as a special assistant to Donald Trump and is currently the chief economist at SMBC, said his views during an interview on CNBC’s ‘Fast Money’ program on Tuesday [1]. He said that inflation remains persistent and will not ease without the implementation of a tighter monetary policy [1, 2].
During the broadcast, Lavorgna said that the Fed will be forced to raise rates to combat inflation [1]. He said the move is necessary to ensure economic stability.
"The Fed, in my view, has to hike…will hike, and it will be this year," Lavorgna said [1].
The call for higher rates comes as economists continue to debate the Federal Reserve's trajectory regarding inflation targets, and employment levels. Lavorgna's position aligns with the view that price pressures are more deeply embedded in the economy than some policymakers may believe [1, 2].
While the Federal Reserve has not yet announced new hikes for the remainder of the year, Lavorgna said the central bank will have no other choice but to act to curb the ongoing inflation [1].
“"The Fed, in my view, has to hike…will hike, and it will be this year."”
A rate hike by the Federal Reserve is a primary tool for slowing an overheating economy. If Lavorgna's prediction holds, it indicates a belief that inflation is structural rather than transitory, which would likely lead to increased mortgage rates and higher costs for corporate debt in the short term.
