Former Kansas City Fed chief calls inflation ‘sticky’ and says interest rates will stay high

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The recently retired president of the Kansas City Federal Reserve Bank says the U.S. is likely to “have higher inflation and higher interest rates for some time.”

It won’t be easy to get inflation back down to the Fed’s 2% target, Esther George said in an interview with American Century Investments. George retired in January and a permanent replacement for her has not yet been named.

“If you look back over the last six months, inflation seems pretty sticky,” she said.

The Fed is widely expected to pause or “skip” an interest-rate increase at its June 13-14 meeting for the first time after almost a year and a half of rate hikes. The central bank wants to evaluate how much the previous increases are slowing the economy and bringing down high inflation.

The Fed has jacked up a key short-term rate to a 16-year high of more than 5% from near zero in early 2022. Senior officials worry they could tip the economy into recession if they continue to raise rates aggressively.

George said she’s in favor of a pause to give the Fed time to assess its next step. She also said she’s not sure if the U.S. will fall into a recession but cautioned that the Fed could trigger one if it’s too aggressive.

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