Staying put on rates won't be good for the Fed or the economy, says Roger Ferguson

Summary

Former Fed Vice Chairman Roger Ferguson discusses Fed Chair Kevin Warsh's upcoming Jackson Hole speech, sticky inflation, and the Fed's policy outlook. He expects two rate hikes over the rest of this year and early next year, arguing that staying on hold risks Fed credibility and the economy. He also sees longer-term Treasury yields rising because heavy government debt issuance will require higher rates to attract buyers.

• Ferguson says market expectations for Warsh's Jackson Hole keynote are high and the Fed faces a communication tightrope.
• Inflation has run above target for about five years and core inflation remains around 2.5% or higher.
• He expects two Fed rate hikes over the rest of this year and early next year.
• He warns staying on hold could damage Fed credibility.
• He says rising long-term Treasury yields partly reflect expected heavy Treasury debt issuance.
• He notes the FOMC is divided, with dissents and some members showing patience.
• He does not expect the Fed chair to directly address deficit or debt policy.
• He views Treasury market intervention as potentially making market signals harder to read.