Fed Officials Split on Interest Rate Hikes Ahead of September Meeting

Federal Reserve officials are proceeding cautiously ahead of their September meeting, with some taking a more hawkish stance than others on interest rates. The July minutes showed substantial support for rate hikes, but there is no consensus on what path monetary policy needs to take in the near term.

San Francisco Federal Reserve Bank President Mary Daly took a patient approach, saying she sees no need for the Fed to take 'preemptive' measures to protect its anti-inflationary 'credibility.' She emphasized that the Fed really has to focus on achieving its inflation target and that it is missing its goal by quite a bit.

However, Daly made clear that she does not favor early or 'preemptive' action to cool inflation, least of all to suit Wall Street. She said there's a lot of discussion about the Fed's credibility, but 'I don't see our credibility at risk.'

Daly is not alone in her cautious approach. St. Louis Fed President Alberto Musalem, who has previously backed rate hikes, sounded somewhat less vociferous Thursday, saying he wants to see more data before deciding whether to advocate a rate hike at the FOMC's Sept. 15-16 meeting.