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Free AccessMNI: Fed’s Waller Wants 50BP Hikes For ‘Several’ Meetings
The Federal Reserve should keep raising interest rates by half percentage points at its next several meetings, and keep considering increases of such a magnitude until inflation has moved closer to the Fed’s 2% goal, Fed Governor Christopher Waller said Monday.
The central bank should also make sure policy is restrictive in order to ensure tighter monetary policy will curb demand.
“I support tightening policy by another 50 basis points for several meetings. In particular, I am not taking 50 basis-point hikes off the table until I see inflation coming down closer to our 2% target,” Waller said in prepared remarks for an event in Frankfurt.
“By the end of this year, I support having the policy rate at a level above neutral so that it is reducing demand for products and labor, bringing it more in line with supply and thus helping rein in inflation.”
Minneapolis Fed Research Director Mark Wright told MNI last week the Fed might want to consider a rate pause as it nears neutral.
Like Wright, however, Waller said the Fed should be to take rates even higher if inflation proved stubborn, in order to ensure that longer-term inflation expectations do not become unmoored.
“Longer-range inflation expectations have moved up from a level that was consistent with trend inflation below 2% to a level that’s consistent with underlying inflation a little above 2%,” he said. “I will be watching that these expectations do not continue to rise.
U.S. inflation has far surpassed both the Fed target and official expectations, registering an 8.3% jump in the year to April according to the CPI, and 6.3% as measured by the Fed’s preferred PCE index.
“No matter which measure is considered, headline inflation has come in above 4% for about a year and core inflation is not coming down enough to meet the Fed’s target anytime soon,” Waller said.
The Fed has raised interest rates by 75 bps so far this year and has signaled it will rates by another 50 bps at at least the next couple of meetings.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.