Fed’s Waller warns rates will ‘keep rising’ even as prices cool

At the same time, policymakers may consider slowing their pace after four consecutive 75 basis-point hikes, and the Fed is considering a 50 basis-point hike at the next December meeting or the one after, Waller said.

“These rates are going to stay – keep going up – and they’re going to stay high for a while until we see that inflation getting closer to our target,” Waller told a UBS Group AG conference in Sydney on Monday. “We still have a long way to go. It doesn’t end in the next one or two meetings.”

The comments echoed statements this month by Fed Chair Jerome Powell and other colleagues who said rate hikes were far from over but the pace could potentially slow soon.

Waller was one of the more hawkish policymakers at the US Federal Reserve, pushing for tighter policy to ease price pressures.

Inflation must continue to fall

Last week’s data showed that US consumer prices slowed more-than-expected in October, with the consumer price index rising 7.7% yoy from 8.2% the previous month.

This reinforced investor bets that the Fed would hike rates by 50 basis points in December, in line with futures market pricing, with the benchmark interest rate peaking at around 4.9% in mid-2023.

“It’s finally good that we’ve seen signs that inflation is starting to come down,” Waller said. “We need to see that kind of behavior continue as inflation slowly comes down before we really start thinking about taking our foot off the brake here.”

The Fed raised interest rates by 75 basis points for the fourth straight meeting on Nov. 2 to a target range of 3.75% to 4% and said more hikes will be needed as it battles the highest inflation in 40 years.

Powell told reporters after the decision that recent disappointing data suggests interest rates may eventually come in higher than previously expected, while noting the central bank could moderate the scope of its hikes as early as December.

Official forecasts for September would hit 4.4% by the end of this year and 4.6% in 2023 – implying a half-point increase in December and a final quarter-point move next year. They will update their quarterly projections next month.