Rajan Calls for Rate Hike Amid Strong Economic Data

Chicago Booth School of Business Professor Raghuram Rajan has called for the Federal Reserve to raise interest rates, arguing that financial conditions are not restrictive. In an interview with Bloomberg ahead of Jackson Hole, where Fed Chair Kevin Warsh is set to deliver his first keynote speech, Rajan said he would be more hawkish than the current rate trajectory.

Rajan pointed to strong data center investment, a large fiscal deficit, and continuous consumer spending as evidence that the economy is not being held back by elevated mortgage rates. He stated that he would have opposed last year's rate cuts and preferred rates to be higher today.

Three Fed officials - Beth Hammack, Neel Kashkari, and Lorie Logan - voted for a quarter-point rate increase in July, but the FOMC ultimately held rates at 3.50% to 3.75%. Rajan's comments come as investors look for clues on the rate trajectory ahead of the September policy meeting.

Rajan is currently serving on the Fed's Balance Sheet Policy Task Force alongside Harvard economists Karen Dynan and former Fed Governor Jeremy Stein. The task force will examine the costs, benefits, and institutional implications of the Federal Reserve's current balance sheet regime.