A Federal Reserve board governor backed “another significant increase” in interest rates later this month, saying the economy’s resilience gives officials “flexibility to be aggressive” in fighting inflation. .
The comments from Christopher Waller, a member of the Federal Open Market Committee, come on the last day officials can make public comments before their next rate-setting meeting.
“Fears of a recession starting in the first half of this year have faded and the strong US labor market gives us the flexibility to be aggressive in our fight against inflation,” he said Friday at an event organized by the Institute of Advanced Studies in Austria.
“Based on what I know today, I support a significant increase at our next meeting on September 20-21 to bring the policy rate to a level that clearly constrains demand,” he added.
Unlike previous meetings, most policymakers have resisted endorsing a specific size rate hike ahead of the meeting, leaving open a debate over whether the Fed will deliver a third straight 0.75 point hike. percentage or will change to half a point.
expectations have growing in recent days that the central bank will opt for the most aggressive option, which would raise the fed funds rate to a new target range of 3 percent to 3.25 percent.
Waller was the latest senior official to say this week that the Fed was committed to removing the hike and emphasizing the risks of easing monetary policy prematurely. If inflation doesn’t slow or rises further this year, he said the federal funds rate will “probably” have to move “well above” 4 percent.
Earlier on Friday, James Bullard, the hawkish St Louis Fed president, told Bloomberg TV that he leans “more strongly” toward a 0.75 percentage point rate hike. Esther George, president of the Kansas City Fed, who also spoke on Friday, said that by taking “deliberate” action, the central bank could prevent higher inflation from taking hold.
Waller said: “While I welcome the encouraging news on inflation, I do not yet see compelling evidence that it is moving significantly and persistently along a path to meet our 2 percent target. The consequences of being fooled by a temporary decline in inflation could be even greater now if another error in judgment damages the Fed’s credibility.”
Waller’s comments echo those of Jay Powell, who spoke Thursday. While the Fed chairman did not comment on the size of the next rate hike, he said the central bank must “act now, frankly, forcefully, as we have been doing and we must continue to do so until the job is done.” .
Lael Brainard, vice president, on Wednesday delivered a similar message, saying the Fed is “in this for as long as it takes to bring inflation down.”
However, he balanced those comments by pointing to forces that could mean the Fed won’t need to be as aggressive. He also said “at some point” the central bank would have to consider the risks of tightening monetary policy too much.
Another inflation report will be released this week ahead of the September meeting, with economists expecting a drop in the monthly and annual consumer price index.
Waller said decisions about the size of additional rate hikes and when the Fed might stop tightening monetary policy should be “driven solely by incoming data.”
