Data says we should move in 0.50% increments, but geopolitical risks warrant caution

Fed Board of Governors member Christopher Waller said in an interview on CNBC on Friday that as data calls for the Fed to move in 50 basis point increments, geopolitical events warrant caution. The data suggest that we move in the direction of a 0.50% rise in the next meetingsWaller continued, adding that Europe will feel the impact of higher oil prices more than the United Statesbut it will knock half a point off US growth this year.

I really want to advance our raises, Waller has said, saying that would imply 50 basis points or more in the next few meetings. I think that we have to raise rates and any monetary policy rule would tell you that we have to be higher than we are right now, he said. If we have to carry on, we’ll carry onadded Waller, noting that we can eliminate the liquidity of the system without doing much damage.

We have the margin to advance earlier and go faster with the balanceWaller pointed out, saying that As long as the Fed is clear in its communications and the market adjusts, there hasn’t been much market turmoil. Getting to or slightly above neutral by the end of the year shouldn’t be a concern for causing a recession, Waller has said, though he did point out that being above neutral by the end of the year would put pressure on demand.

Waller has said that he hopes supply chain issues begin to be resolved by the end of this year or early next year year and that should help with inflation, adding that think there will be some reversal in inflation next year. We can push prices down through a tightening policy, he added. Waller has said that he would be more concerned about the Fed’s credibility if he saw that 2yr inflation expectations were not anchored, but they are not.