William Dudley, CEO of the Federal Reserve Bank of New York from 2009 to 2018, formerly of Goldman Sachs, asserted in an interview with Bloomberg Surveillance May 11 that the Federal Reserve should immediately raise interest rates up to between 4 and 5% —none of Fed Chairman Jerome Powell’s gradual 1/2 point increases—and perhaps go up to between 5-6% in a month or two. It’s time for the Fed to stop “sugarcoating” its message on how high rates have to go, he said, adding that a 3-4% interest rate was in range six months ago, but now he thinks 4 to 5% is necessary, and “it wouldn’t shock me if I’m 5 to 6% a few months from now.”
Clearly uninterested in the chaos such a rate hike would unleash, Dudley argued that inflation is running well above the Fed’s 2% target. “The Federal Reserve has got to tighten monetary policy sufficiently to slow the economy down and push the unemployment rate up. That’s what’s required, and I think the Federal Reserve should be more forthright about explaining that to the American public. If you start to sugar coat it, then financial conditions don’t tighten as much and you also run the risk that people will lose confidence in the Federal Reserve.” God forbid!
