Fed policymakers call for further rate hikes

Federal Reserve policymakers on Wednesday signaled they will push on with more interest rate hikes, with several supporting a top policy rate of at least 5 per cent even as inflation shows signs of having peaked and economic activity is slowing.

"I just think we need to keep going, and we'll discuss at the meeting how much to do," Cleveland Fed President Loretta Mester said in an interview with the Associated Press.

The remarks appeared to reflect a widely shared view among her fellow policymakers, most of whom as of December had penciled in a 5.00 per cent-5.25 per cent policy rate in coming months.

Mester said that for her part she expects the Fed's policy rate to need to go "a bit higher" than that and stay there for some time to further slow inflation.

The Fed's benchmark overnight lending rate currently sits in a target range of 4.25 per cent to 4.50 per cent, and investors expect the Fed to lift that rate by a quarter of a percentage point at the end of its January 31-February 1 meeting.

But slowing spending, inflation, and manufacturing - all reported earlier on Wednesday - have helped stoke expectations that the Fed will end its current round of rate hikes sooner than Mester and most of her colleagues expect, with the policy rate just shy of 5 per cent.