Fed Board of Governors member Christopher Waller said on Monday that he favors raising interest rates by another 50 basis points at upcoming Fed meetings and that the policy rate should be above neutral by the end of the year to reduce demand, reported Reuters.
Waller said he is not withdrawing the possibility of raising rates by 50 basis points until inflation approaches the Fed’s 2.0% target and that if inflation is stubbornly high, he is prepared to do more. The Fed’s balance sheet size reductions are equivalent to a couple of additional 25 basis point rate hikes, he noted.
Additional remarks:
“I am optimistic that the strong US labor market can withstand higher rates without a significant rise in unemployment.”
“I don’t know how soon the supply constraints will be eased.”
Inflation remains alarmingly high.
Long-term inflation expectations have risen to a level consistent with core inflation somewhat above 2%.
Core inflation is not coming down enough to hit the Fed’s 2% target any time soon.
The economy continues to advance at a good pace.
I don’t expect a repeat of the drop in production in the first quarter.
Source: Fx Street
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