Federal Reserve Bank of San Francisco President Mary Daly and her Philadelphia Fed peer Patrick Harker joined the ranks of officials publicly discussing an interest-rate increase as early as March as the central bank seeks to combat the hottest inflation in a generation.

“I definitely see rate increases coming, as early as March even, because it really is clear that prices have been uncomfortably high,” Daly told PBS NewsHour in an interview Wednesday evening. “American consumers are feeling the pain.”

Harker supports at least three increases this year and is “very open to starting in March,” he said in an interview with the Financial Times published online Thursday.

Their messages, which echo remarks from other Fed officials in recent days, have been fully absorbed by financial markets. Investors expect policy makers to raise interest rates at their March meeting and signal a shift toward shrinking the Fed’s US$8.8 trillion balance sheet later in 2022.

The consumer price index climbed seven per cent in 2021, the largest 12-month gain since June 1982, according to Labor Department data released earlier Wednesday.

Containing Prices

Daly, who had been dovish on the outlook for policy until late last year, declined to say how many times she favored raising rates. Her colleague James Bullard of St. Louis earlier told the Wall Street Journal that four quarter-point moves now look to be in the cards this year.

U.S. Fed Chair Jerome Powell told lawmakers Tuesday that the U.S. central bank will do what’s needed to keep price pressures contained, without giving specific guidance on when officials would act.

The Fed's New Dot Plot

All members of the rate-setting Federal Open Market Committee saw rate hikes this year from the near-zero levels to which they were slashed at the outset of the pandemic in March 2020. The median estimate was for three quarter-point moves.

Federal Reserve Bank of Cleveland President Loretta Mester, who spoke earlier Wednesday, confirmed that she was in that camp.

Balance Sheet

That compared to estimates in September in which nine of the 18 officials saw no rate move this year. The pivot reflects policy makers’ determination to bring price pressures back under control.

“I currently have three increases in for this year,” Harker told the FT. “I’d be open to more if that’s required.”

Officials have also discussed allowing the balance sheet to shrink at a faster pace than it did after the financial crisis.

Mester said the central bank should shrink its balance sheet as fast as it can without disrupting financial markets and reiterated her support for a March interest-rate increase.

“The economy’s in a much stronger place than it was when we started doing the reductions last time,” Mester said during a Wall Street Journal Live event streamed on Twitter. “Frankly I would like to reduce it as fast as we can, conditional on it not being disruptive to the functioning of the financial markets.”

Mester is among the more hawkish members at the U.S. central bank, though other officials have been making similar arguments in recent weeks as inflation has surged.

--With assistance from Ramsey Al-Rikabi.