Fed Governor Christopher Waller says he’s prepared to take rates past ‘neutral’ to fight inflation

Christopher Waller, U.S. President Donald Trump’s nominee for governor of the Federal Reserve, listens during a Senate Banking Committee confirmation hearing in Washington, D.C., on Thursday, Feb. 13, 2020.

The governor of the Federal Reserve said Monday that he expects interest rate increases to continue through the rest of the year in an effort to bring inflation under control.

The official from the central bank said he would support hikes that exceeded the neutral level.

According to estimates provided by Fed officials in March, rates will increase by at least 2 percentage points from here.

Over time, we will learn more about how monetary policy is affecting demand and how supply constraints are evolving.

The minutes from the Federal Open Market Committee meeting held in early May show that sentiment was reflected. The meeting summary said officials believe a restrictive stance of policy may be appropriate depending on the evolving economic outlook and the risks to the outlook.

The Fed is expected to raise benchmark borrowing rates to a range between 2.5% and 2.5%, in line with a neutral rate. If inflation continues to rise, the Fed will go even further. The fed funds rate is between 0 and 1%.

Policymakers see rates rising by 50 basis points in the next few meetings, according to minutes. As the Fed seeks to tame inflation that is close to its highest level in more than 40 years, he is on board with that position.

I will not take 50 basis-point hikes off the table until I see inflation coming down closer to our 2 percent target.

The data showed that inflation accelerated in April, but at a slower pace. The Fed watches core personal consumption expenditures, which increased 4.9% for the month from a year ago, down from 5.2% in March. Headline PCE inflation, including food and energy costs, rose 6.3% in the month of June.

He thinks the Fed can raise rates without causing an economic downturn. The aim of the Fed is to reduce labor demand without causing an increase in the unemployment rate. According to the Bureau of Labor Statistics, there are more job openings than available workers.

The path of the economy depends on a number of factors, including how the Ukraine war and COVID-19 evolve. He said that he was optimistic that the labor market could handle higher rates without a significant increase in unemployment.