MNI:Fed's Waller Hopes Inflation Comes Down With 'Little Pain'

The Federal Reserve should be able to bring inflation back to its 2% target without a sharp rise in unemployment because inflation expectations remain well anchored, Fed Governor Christopher Waller said Friday.

"Measures of longer-term inflation expectations have remained contained, while shorter- term expectations had moved up in 2021 and have partially reversed their earlier increases," Waller said in prepared remarks for a speech at a San Francisco Fed conference.

"A steep Phillips curve means inflation can be brought down quickly with relatively little pain in terms of higher unemployment. Recent data are consistent with this story."

Waller made no reference to the recent banking turmoil that has gripped financial markets this month, curtailing expectations for further Fed hikes. He also did not address the prospect of future tightening. Markets see a roughly 50-50 chance of one last 25bp increase in May versus a pause at the current 4.75% to 5% range, according to CME FedWatch.

(See MNI INTERVIEW: Financial Stress Could Be In Early Stage-Hoenig)