The governor of the Federal Reserve’s board has backed “another significant hike” in interest rates later this month, saying the economy’s resilience gives officials the “flexibility to be aggressive” in fighting inflation.
The comments by Christopher Waller, who sits on the Federal Open Market Committee, come on the last day that officials can make public statements before the next rate-setting meeting.
“Fears of a recession that started in the first half of this year have faded, and the robust U.S. labor market gives us the flexibility to be aggressive in the fight against inflation,” he said. Advanced research in Austria.
“Based on what I know today, I am in favor of a significant increase at our next meeting on September 20 and 21 to bring the policy rate to a setting that clearly constrains demand,” he said.
Unlike past meetings, most policymakers resisted backing a sizeable rate hike ahead of the meeting, leaving open debate over whether the Fed would deliver a third straight hike of 0.75 percent or move to half a point.
They have expectations grew up In the coming days, the central bank will choose a more aggressive option, which will raise the federal funds rate to a new target range of 3 percent to 3.25 percent.
Waller became the latest senior Fed official this week to say he was committed to ending the hike and to highlight the risks of prematurely easing monetary policy. He said it would be “likely” that the federal funds rate would move “well above” 4 percent if inflation doesn’t fall or rise further this year.
Earlier on Friday, hawkish St. Louis Fed President James Bullard told Bloomberg TV that he was leaning “stronger” toward a 0.75 percentage point hike. Also speaking Friday, Kansas City Fed President Esther George said the central bank could prevent higher inflation from building up by taking “deliberate” action.
Waller said: “While I welcome the encouraging news on inflation, I do not see convincing evidence that it is on a meaningful and sustained downward trajectory towards our 2 percent target. “The consequences of being fooled by the temporary easing of inflation could be even greater now if another misjudgment undermines the Fed’s credibility.”
Waller’s comments echo those of Jay Powell, who spoke Thursday. While the Fed chairman would not comment on the size of the next rate hike, he said the central bank “needs to act now, clearly, decisively, as we have done before, and we must continue to do so until the job is done.”
Lael Brainard, vice chairman, on Wednesday delivered a similar message says the Fed is “about as long as it takes to bring inflation down.”
However, he balanced those comments by pointing to forces that may mean the Fed may not need to be so aggressive. He also said that “at some point” the central bank will have to consider the risks of tightening monetary policy too much.
Another inflation report is due this week ahead of the September meeting, when economists expect the consumer price index to fall on a monthly and annual basis.
Waller said decisions on the size of additional rate hikes and when the Fed might stop tightening monetary policy should be determined “only by incoming data.”
