Fed Governor Waller says he’s open to ‘larger’ rate hike this month than in June

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

The governor of the Federal Reserve is willing to consider what would be the most aggressive interest rate hike in decades.

While he supports a 75 basis point hike at the July 26-27 meeting, he will keep an open mind about what the Fed should do to control inflation, which is running at its fastest pace since 1981

He said that his base case for July depended on incoming data. Data on retail sales and housing will be released before the meeting. I would lean towards a larger hike at the July meeting if the data comes in better than expected.

Markets started pricing in a full percentage point increase in the Fed's benchmark short-term borrowing rate following Wednesday's consumer price index data. According to the data, the likelihood for that outcome stood at 80%.

It would be the biggest one-month increase since the early 1980s if the Fed went for 100 basis points.

The paramount mission of the Fed is to get prices down.

He said that we need to move quickly to get inflation falling in a sustained way and then consider what further tightening will be needed to achieve our dual mandate.

He was concerned about inflation, but he was more positive about the economy.

The strength of the jobs market has him fairly confident that the U.S. economy won't go into a recession in the first half of the next decade.

He believes the economy can achieve a soft landing even with the Fed tightening. The rule-of-thumb definition of a recession is that the US economy contracted in the first quarter.