Federal Reserve Bank of Boston President Eric Rosengren said March 9 that the Fed may have to raise interest rates faster than the three rate hikes expected by markets.
"To keep the economy on a sustainable path, I expect that it will be appropriate to remove monetary policy accommodation at a regular but gradual pace, and perhaps a bit faster than the three one-quarter-point increases envisioned for this year," he said in a speech in Massachusetts.
Rosengren pointed out that developments since the December meeting, including tax cuts and further strengthening of the labor market, "generally reinforce my view of the need for somewhat more removal of accommodation than was reflected" in the Summary of Economic Projections released by the monetary policy-making Federal Open Market Committee.
The latest projections, which will be updated at the FOMC's March 20-21 meeting, showed a median expectation of three rate hikes this year.
"The economic data have been quite good, monetary policy remains accommodative, and fiscal policy has just become quite a bit more stimulative," said Rosengren, who does not vote on the committee this year.
U.S. nonfarm payroll employment increased by 313,000 in February, the Bureau of Labor Statistics reported March 9. "That's an awful lot of jobs, particularly when the unemployment rate is only at 4.1%," Rosengren said. Overall, the economy is "doing quite well."
Meanwhile, Rosengren's colleague on the FOMC, Federal Reserve Bank of Chicago President Charles Evans, said March 9 that he would prefer the committee holds off on raising rates when they meet this month. Evans, who is also not a voting member this year, argues that the Fed should wait until the middle of 2018 for its next rate hike if inflation is strengthening and shaking off some factors that held it down early in 2017.
