A governor on the Federal Reserve’s board backed “another substantial increase” in interest rates later this month, saying the resilience of the economy gives officials ” flexibility to be active” in the fight against inflation.
Comments from Christopher Waller, who sits on the Federal Open Market Committee, come on the last day officials can make public comments ahead of their next rate-fixing meeting.
“Recession concerns that began in the first half of this year have disappeared and the strong US labor market is giving us the flexibility to be aggressive in our fight against inflation,” he said on Thursday. Six at an event organized by the Institute for Advanced Study in Austria.
“Based on what I know today, I am in favor of a substantial increase at our next meeting on September 20 and 21 to bring the policy rate back to a setting that clearly limits demand, ” he added.
Contrary to past meetings, most policymakers have resisted endorsing a rate hike of a specific size ahead of the meeting, leaving a debate over whether the Fed will raise rates again. third consecutive 0.75 percentage point or move to half point.
Expectations have get a raise In recent days, the central bank will choose to be more aggressive, which will raise the federal funds rate to a new target range of 3% to 3.25%.
Waller was the latest top official this week to say the Fed was committed to erasing the upside and underscored the risks of premature monetary policy easing. If inflation doesn’t ease or increase further this year, he said the federal funds rate “probably” will need to move “higher” 4%.
Earlier on Friday, James Bullard, the hawkish chairman of the St Louis Fed, told Bloomberg TV he was leaning “stronger” towards a 0.75 percentage point rate hike. Esther George, Kansas City Fed president, who also spoke Friday, said that by taking “deliberate” action, the central bank can prevent higher inflation.
“While I welcome the promising news on inflation, I have yet to see convincing evidence that it is moving meaningfully and consistently down on trajectory to reach the 2% target of the inflation target,” Waller said. we. The consequences of being misled by a temporary easing in inflation could be even greater now if another misjudgment damages the credibility of the Fed.”
Waller’s comments echo those of Jay Powell, who spoke on Thursday. While the Fed Chairman did not comment on the size of the next rate hike, he said the central bank needs to “act now, frankly, forcefully, as we have and we need to keep until the job is done”.
Lael Brainard, vice president, on Wednesday delivered a similar message, saying that the Fed “does for the time being, as long as it can bring down inflation”.
However, she balanced those comments by pointing to forces that might mean the Fed wouldn’t need to be so aggressive. She also said that “at some point” the central bank will need to consider the risks of tightening monetary policy.
Another inflation report is due out this week ahead of the September meeting, with economists expecting the consumer price index to fall on a monthly and yearly basis.
Waller said decisions about the size of additional rate hikes and when the Fed might stop tightening monetary policy should be “determined solely by incoming data.”