Christopher Waller, U.S. President Donald Trump’s nominee for governor of the Federal Reserve, speaks during a Senate Banking Committee confirmation hearing in Washington, DC, U.S., on Thursday , February 13, 2020.
Andrew Harrer | Bloomberg | beautiful pictures
Federal Reserve Governor Christopher Waller on Friday echoed recent views from his peers, saying he expected a major rate hike later this month.
He also said policymakers should stop trying to guess the future and instead stick to what the data is saying.
“Ahead of our next meeting, I support another substantial increase in the policy rate,” Waller said in remarks prepared for the speech in Vienna. “Looking further, however, I can’t tell you the right policy path. The range of the peak and the speed at which we will move there will depend on the data we will receive on the economy. economic.”
Those comments are similar to recent comments by Fed Chairman Jerome Powell, Vice Chairman Lael Brainard and others, who said they were resolute in their efforts to reduce inflation.
Markets strongly expect that the central bank will raise its benchmark borrowing rate by 0.75 percentage points, which would be the third move in a row of that magnitude and the pace of monetary tightening. fastest since the Fed began using the benchmark funds rate as its primary policy tool in the early 1990s.
While Waller did not commit to a specific increase, his comments in a mostly hawkish tone suggested he would support a 0.75-point move, as opposed to a half-point gain.
“Based on all the data we have received since the last FOMC meeting, I believe the policy decision at our next meeting will be very straightforward,” he said. “Because of the strong labor market, there is currently no trade-off between the Fed’s inflation and employment target, so we will continue to aggressively fight inflation.
If the Fed makes a three-quarter point increase, it would bring the benchmark interest rate up to the 3%-3.25% range. Waller said that if inflation doesn’t ease for the rest of the year, the Fed may have to offer rates “4 percent higher.”
He also suggested that the Fed stay away from the practice of providing “forward guidance” on what their future path should look like and the factors that will come into play in deciding those moves.
“I believe forward guidance is becoming less useful at this stage of the tightening cycle,” he said. “Future decisions about the size of the additional rate increase and the destination of the policy rate during this cycle should only be determined by incoming data and their impact on economic activity, employment and inflation.”
Waller pointed to encouraging signs that inflation is moderating from its highest peak in more than 40 years.
The consumer spending price index, the Fed’s preferred inflation gauge, rose 6.3% from a year ago in July – 4.6 percent excluding food and energy. This is still well above the central bank’s 2 percent long-term target, and Waller said inflation remains “pervasive” even if it has eased slightly recently.
He also noted that inflation appeared to have softened slightly at one point last year, then rose sharply to levels at one point in time with the consumer price index rising 9% year-on-year.
“The consequences of being misled by a temporary easing in inflation could be even greater now if another misjudgment damages the credibility of the Fed. So until I see a moderation.” meaningful and persistent to core price increases, I would advocate taking substantial further steps to tighten monetary policy,” he said.
