MNI: Fed’s Waller Wants Two More Interest Rate Hikes This Year

The Federal Reserve should raise interest rates twice more this year to bring U.S. inflation back down to the central bank’s 2% goal, Fed Governor Chris Waller said Thursday.

“I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target,” Waller said in prepared remarks to the Money Marketeers of New York University. “Furthermore, I believe we will need to keep policy restrictive for some time in order to have inflation settle down around our 2% target.

Waller said he supported the decision to hold rates steady at 5-5.25% in June in large part because of uncertainty about the possible credit market effects from the March banking turmoil, something he no longer sees as a major concern.

“I am more confident that the banking turmoil is not going to result in a significant problem for the economy, and I see no reason why the first of those two hikes should not occur at our meeting later this month,” he said.

After that, Waller says he will be data dependent.

“If inflation does not continue to show progress and there are no suggestions of a significant slowdown in economic activity, then a second 25-basis-point hike should come sooner rather than later, but that decision is for the future,” he said.

Waller said the decline in U.S. consumer prices to 3% in the year to June, the lowest level since March 2021, is welcome news. (See: MNI INTERVIEW: CPI Drop Won't Stall Hikes-Ex-NY Fed Economist)

“But one data point does not make a trend. Inflation briefly slowed in the summer of 2021 before getting much worse, so I am going to need to see this improvement sustained before I am confident that inflation has decelerated,” he said.