It is too soon to say that inflation is on “the right trend” and moving down to the central bank’s 2% target, Kansas City Fed President Esther George said Friday.
“The direction is a good one. Inflation is still well above the Fed’s target. To be true to the price stability mandate, it looks like we’ll have to be a little more patient to see if we’re on the right trend and going to be there more convincingly to that 2% target,” George said, in an interview on Bloomberg Television.
Asked what would give her more confidence that inflation was coming down, George pointed to the service sector, where there is a lot of price pressure.
Inflation pressures in the service sector look like they are going to continue, George said. Spending on services is continuing, in part because people are travelling a lot, she noted.
“That would be a component where I’d want to see some progress before having more confidence that we’re seeing inflation come down,” she said.
The Kansas City Fed president said the labor market remains very tight and contacts in her district report that finding workers who will come to work is their “number one concern.”
“So I think on the supply side of the economy, we are seeing some binding constraints there that are making it more complicated to see inflation come down in a very convincing manner,” George said.
George said she is watching to see if job openings come down. A soft-landing for the economy is still possible, she added.
Another key is what consumers do with their higher savings that was amassed during the pandemic. If consumers hold on to their savings, that may make the Fed’s job easier. If they continue spending, the Fed may need to tighten policy further, she said.
George is set to retire on Jan. 31.
were slightly higher in morning trading. The yield on the 10-year Treasury note
inched up after hitting the lowest level since September earlier in the week.