Fed’s George says pace and endpoint of rate hikes still up for debate

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Kansas City Federal Reserve Chair Esther George speaks to the National Association for Business Economics in Denver, Colorado, U.S., October 6, 2019. REUTERS/Ann Saphir/

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Aug 18 (Reuters) – The recent easing of financial conditions in the United States, including a surge in equity prices, may have been based on an overly optimistic sentiment that inflation was peaking and the pace of rate hikes interest rate was likely to slow, Kansas City Federal Reserve Board Chair Esther George said Thursday.

In comments to a Kansas City economics group, George said the pace and ultimate level of future rate hikes remains a matter of debate. “To know where that stopping point is…we’re going to have to be completely convinced that the (inflation) number is coming down,” she said.

George did not indicate a preference on whether the Fed should approve a third straight 75 basis point rate hike at next month’s policymakers’ meeting, or a smaller half-point hike – the two main options considered.

But she said July’s drop in inflation, while good news, was not proof that the underlying problem was solved. Much of the drop was related to energy costs, she noted, while prices for a wide range of other services and goods continued to rise.

“It’s hardly comforting,” she said. And recent “abysmal” productivity figures, which imply workers are producing less for every dollar they are paid, could make controlling inflation even more difficult, she added.

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Reporting by Howard Schneider; Editing by Paul Simao and Leslie Adler

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