Obama-Era Economic Adviser Christina Romer Thinks Policymakers Will Face Difficult Decision Over Rate Path: 'Going To Need To Dial Back Before...'

Christina Romer, an economics professor at the University of California, Berkeley, and chair of the White House's Council of Economic Advisers (CEA) from 2009 to 2010, reportedly said the Federal Reserve's effort to shock the economy back to lower inflation is in its early days.

She told a national gathering of economists late on Saturday the Fed has raised its target policy rate by over 4 percentage points in the last year, and "we are just now entering the window where the effects might start to be noticed," according to a Reuters report.

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"Because of the lags involved, policymakers are going to face a very difficult decision about when to stop rate increases or reverse course," Romer said. "Policymakers are going to need to dial back before the problem is completely solved if they want to get inflation down without causing more pain than necessary," she said.

The anticipation of rate hikes getting dialed down further is increasing on Wall Street where major indices gained over 2% on Friday following the release of the employment data. The SPDR S&P 500 ETF Trust SPY closed 2.29% higher while the Vanguard Total Bond Market Index Fund ETF BND gained 1.10%.

Romer’s comments come at a time when there are widespread expectations of rate cuts somewhere down the line this year, despite the central bank asserting — as the FOMC meeting minutes showed — it would not be appropriate to begin reducing the federal funds rate target in 2023.

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