Fed Governor Christopher Waller: Rate hikes could slow down
Christopher Waller, a key Federal Reserve official, on Wednesday added his voice to a rising number of Fed officials who have indicated the central bank is likely to slow the pace of its rate hikes beginning in December.
Waller, a member of the Fed’s Board of Governors, said he was ready to raise the Fed’s interest rate by half a point next month amid signs that inflation was cooling.
At each of its four most recent monetary policy meetings, the central bank has raised interest rates by an aggressive three-quarter point. The cumulative effect has been to make many consumer and business loans more expensive and increase the risk of a recession.
At the same time, Waller emphasized that inflation remains painfully high. And he warned that there had been instances in the past when economists thought inflation would fall, only to see prices reverse and accelerate again.
“The data for the past few weeks has made me more comfortable considering moving back to a (half) hike,” Waller said in a speech in Phoenix. “It’s important to remember that this would still be a very significant tightening measure.”
The Fed has raised its short-term interest rate this year, the fastest since the early 1980s — to a range of 3.75% to 4%, its highest level in about 15 years.
These increases have increased borrowing costs for mortgages, auto loans, and credit cards, among other things. Fed officials intend to use higher interest rates to slow borrowing and spending and ease inflationary pressures.
Waller’s comments followed statements by Mary Daly, President of the Federal Reserve Bank of San Francisco, earlier Wednesday. Daly said in an interview with CNBC that the Fed is likely to raise its short-term interest rate by at least a full percentage point above its current level.
Both Waller and Daly, like Chairman Jerome Powell at a news conference this month, took pains to stress that rates will eventually rise higher even if the Fed hikes them in smaller increments.
Waller also underlined his view that the October inflation report, which showed a slower rise in prices, is just a data point and not necessarily solid evidence that inflation is declining.
“I can’t stress enough that a report does not represent a trend,” he said. “It is far too early to conclude that inflation is falling on a sustained basis.”
Waller noted that inflation showed signs of slowing late last year before picking up again.
“I will not be fooled by any report and will continue to monitor the data leading up to the December FOMC meeting,” he said.
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