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Fed board members open door for 1-point hike as demand picks up

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WASHINGTON >> Christopher Waller, a member of the Federal Reserve’s board of governors, said today that he would support a steep 1 percent hike in the Fed’s key short-term interest rate later this month if future economic data points to a stronger trend. would be ready to do. consumer expenditure.

Such an increase would mark a further hike in the Fed’s rates as it intensifies its fight against accelerating inflation. Rapid rate increases will increase the risk that the central bank’s anti-inflationary policies will lead to a recession. The Fed hasn’t raised its rate by 1 percent in several decades.

In a speech in Victor, Idaho, Waller said he still supports a 0.75% increase at the central bank’s next policymaking meeting in two weeks, even after a government report on Wednesday Consumer inflation reached a new 40-year high.

But further economic data – including Friday’s report on June retail sales and several reports on home sales and prices – will be released before the next Fed meeting. If those figures are “physically stronger than expected,” Waller told TODAY, “it would lean me toward a bigger increase.”

Wednesday’s inflation report showed prices rose 9.1% in June compared to 12 months earlier, the biggest such increase since 1981. Although much of inflation was driven by higher costs of food and gas, price increases were widespread and in many cases accelerated in such sectors. in the form of rent, restaurant food and medical services.

According to the CME Group, speaking during the question-and-answer session, Waller suggested that a 1-point rate hike at the Fed meeting later this month is less than the 80% probability that financial markets reported late Wednesday. The night was given

“The markets may have overtaken themselves a little tomorrow,” he said.

As of today, traders had held back about a three-quarter-point Fed rate hike as more likely than a full-point hike.

Waller insisted, however, that Wednesday’s worrying consumer inflation report sealed the case for a three-quarter-point increase, rather than the half-point increase that Chair Jerome Powell suggested at an upcoming Fed meeting. was also on the table.

On Wednesday, after the inflation data was released, Federal Reserve Bank of Atlanta President Rafael Boustik suggested that the July meeting “is everything going” – including a possible 1-point increase.

In an interview on Bloomberg TV Wednesday evening, Cleveland Fed chief Loretta Meester declined to say what size increase could be considered. But she said the consumer inflation report was “equally bad – there was no good news in that report.”

In his remarks today, Waller played down concerns that the economy could be nearing a recession. He pointed to healthy job gains this year and the unemployment rate at a half-century low.

“I am very confident that the US economy does not enter a recession in the first half of 2022 and that economic expansion will continue,” he said.

As a result, a “soft landing” in which the economy grows at a slower pace, bringing inflation toward the Fed’s 2% target, is “very plausible.”

Waller said with the economy still growing, the Fed should focus on inflation. Wednesday’s inflation report was “a major league disappointment.”

“No matter how you look at the data, inflation is very high, and my job is to drive it towards our 2% target,” he said.

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