Council of Economic Advisers Chairman: It would be a mistake for the Fed to hike rates

Summary

Christopher Phelan, Chairman of the Council of Economic Advisers, argues the Fed should not raise rates because inflation is cooling across major measures and policy should follow inflation data rather than market expectations. He discusses the difference between inflation and the price level, affordability, and upward pressure on long-term rates from global investment demand. The interview comes ahead of a Fed meeting where markets price a high probability of a hike.

• CEA Chairman Christopher Phelan says a Fed rate hike would be a mistake.
• He argues inflation is coming down sufficiently fast across CPI, core CPI, PCE, and core PCE.
• He wants the Fed to follow inflation data rather than Wall Street or market expectations.
• He notes market pricing implies a high probability of a rate hike at the upcoming meeting.
• He sees upward pressure on long-term interest rates from global investment demand, not inflation expectations.
• He distinguishes between lower inflation and a lower price level, noting affordability remains a concern.
• He says wages need to keep up with past price increases.