Fisher either wanted to see less-aggressive actions, or no changes at all to interest rates.

“I don’t know a single person on the committee that isn’t concerned about inflation,”
Fisher told reporters immediately following his Wednesday speech to the Commonwealth Club of California. “The question is, ‘what is the right treatment? That is subject to debate.’”

In his speech, Fisher said he expects the Fed will raise rates should the public expectations of higher prices begin to surge. And the combination of higher inflation and slower growth bodes poorly for the U.S. economy.

U.S. consumers are “in for a period of anemic economic activity [that probably will last] for awhile,” Fisher told journalists after the speech. And then when the economy quickens, the U.S. may be “encumbered by a higher rate of inflation than we ordinarily would like to have.”

According to the April Fed meeting minutes, most FOMC members viewed last month’s rate cut as a “close call.” Along with Fisher, the meeting records show that Philadelphia Fed President Charles Plosser wanted the central bank to stand pat on rates, citing the “more worrisome development” in inflation.

Going forward, Money Morning’s Hutchinson says one additional recent development further buttresses his prediction of an interest-rate increase by the Fed: On Wednesday, Federal Reserve governor Frederic Mishkin announced that he’s leaving the central bank Aug. 31 to return to teaching at Columbia University’s Graduate School of Business. A member of the Fed’s board of governors since Sept. 5, 2006, Mishkin was part of the “soft money crowd,” who advocated lower rates, and who might therefore oppose a move to raise them anew, Hutchinson says.

Given that, Hutchinson says that a Fed Funds increase of a quarter to a half-percentage point is possible at one of the next two meetings – the one in June, or the next one in August.

Futures traders expect the Fed to hold off on further rate cuts this summer, and to start raising rates in the fall. Futures contracts price in a 4% chance of an additional rate cut when the Fed meets in late June and a 56% chance that FOMC policymakers will opt to boost the Fed Funds rate by a quarter point to 2.25% when they meet in late October, MarketWatch.com reported.

Despite the shift in expectations among institutional investors, a continued escalation in crude oil and gasoline prices has kept alive the threat of inflation.
Needless to say, Money Morning will continue to watch market changes, and will keep you informed of our expectations.

By William Patalon III
Executive Editor
Money Morning/The Money Map Report

Source: Dallas Fed President Lends Credibility to Money Morning’s Prediction That the Federal Reserve Will Soon be Boosting Interest Rates

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