STANFORD, Calif.—A former senior Federal Reserve official said it was likely that the central bank would need to raise its benchmark interest rate over the next year to at least 3.5% or to even higher levels that deliberately slow economic growth to bring down inflation.
“Even under a plausible best-case scenario in which most of the inflation overshoot last year and this year turns out to have been transitory, the funds rate will, I believe, ultimately need to be raised well into restrictive territory,” said Richard Clarida, referring to the federal-funds rate, in remarks prepared for delivery Friday at a conference at Stanford University’s Hoover Institution.
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