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Waller (Fed): Supports raising interest rates by 75 basis points in July

US Federal Reserve Governor Christopher Waller said he would support another 75 basis point rate hike at the central bank meeting in July if the financial data is what he expects, according to Bloomberg.

“The Fed is fully committed to restoring price stability,” Waller said.

The Fed raised interest rates by 75 basis points on Wednesday, the largest increase since 1994. President Jerome Powell, who has vowed to raise interest rates until there is “clear and convincing” evidence that inflation is falling, said told reporters at a news conference after the meeting that another 75 basis points increase or a 50 basis point move was possible at the next Fed meeting in July.

Officials predict interest rates will rise to 3.4% by December and 3.8% by the end of 2023. Both levels will be the highest since early 2008, when the US economy was on the brink of collapse. of the financial crisis.

“I do not care what causes inflation, it is very high, it is my job to reduce it,” said Waller. “The higher interest rates and the course in which we set them, will put downward pressure on demand in all sectors.”

Describing fears of a recession as “a bit excessive”, Waller said “we may need to move below the growth trend for six months to a year, that’s okay. Maybe unemployment should rise to 4%, 4.5% – I think it will be from 4% to 4.25% “.

“At the moment we have not seen such inflation for 40 years and this is the most important thing to worry about.”

In his speech, Waller analyzed the lessons learned from this crisis and the pandemic. The Fed took swift and aggressive monetary policy action to halt economic and financial losses during the financial crisis and quickly returned to action as Covid-19 spread in March 2020, cutting interest rates to almost zero. , boosting mass bond markets and implementing a number of emergency facilities to stem the panic in financial markets.

“The first time for these actions was just a decade ago, and there is good reason to believe that such a reaction may no longer be extraordinary,” he said. Future recessions, even “formal” ones, may well require us to turn again to the aggressive policy actions of the last two years, he said.

Therefore, he said it was important to learn from experience and acknowledged the criticism that the Fed was slow to start normalizing its policy, as it stopped bond purchases only in March and started raising interest rates a few days later. He blamed policymakers for using too restrictive criteria to start restricting bond markets, which in turn delayed interest rate hikes.

Source: Capital

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