MNI BRIEF: Fed's Waller Says Rate Hikes Won't Hurt Employment

Frontloading Federal Reserve interest rate increases can cool off demand for goods, services and labor without hurting the unemployment rate, Fed Governor Chris Waller said Tuesday.

"We think we can raise interest rates, pull back demand and not have a big impact on employment or unemployment," he told the Economic Club of Minnesota. "We have a labor market that's so hot, so overstimulated, that it's a market where you can pull back a lot of demand for labor and it would actually be a good, not a bad thing."

Putting the labor market "back into equilibrium" means outsize wage increases won't get passed on in the form of higher prices, which would be concerning, he added. Former Fed staffers have told MNI that the unemployment rate will have to rise to 4% or more to be compatible with its inflation objectives. (See: MNI: Fed Must Cool Job Market - Ex-Officials)