Federal Reserve building in Washington DC, US. Close up of a top part of the building with eagle statue.

A run of strong economic data and signs that inflation remains stubbornly high could lead the Federal Reserve to raise its benchmark rate higher in the coming months than it has previously forecast, several Fed officials say.

On Thursday, Christopher Waller, a member of the Fed’s influential Board of Governors, said that if the economy continued to show strength and inflation remained elevated, the central bank would have to lift its key rate above 5.4%. That would be higher than Fed officials had signaled in December, when they projected it would peak at roughly 5.1% this year.

“Recent data suggest that consumer spending isn’t slowing that much, that the labour market continues to run unsustainably hot and that inflation is not coming down as fast as I had thought,” Waller said in prepared remarks for a business conference in Los Angeles.

His suggestion was in contrast to a speech he gave in January, titled “A Case for Cautious Optimism,” that captured a prevailing sentiment at the time that inflation had peaked and was steadily declining.

On Wednesday, Neel Kashkari, president of the Federal Reserve of Minneapolis, said, “I lean towards continuing to raise further.” He was responding to government reports that consumer spending and hiring were strong in January and that inflation worsened last month.

“These are concerning data points, suggesting that we’re not making progress as quickly as we would like,” Kashkari said.

Last Friday, Loretta Mester, president of the Cleveland Fed, told Bloomberg News that the Fed “needs to do a little more” to raise rates and to keep them elevated for an extended period.

In Canada on Thursday, the Parliamentary Budget Office forecast that the Bank of Canada will keep its key interest rate target on hold at 4.5% for the rest of 2023, based on trimmed expectations for growth.