The central bank may need to raise its interest rate by 50 basis points this year to tame inflation, according to the Federal Reserve Governor.
Though he voted for a 25-basis-point move this week due to uncertainty from the Russian invasion of Ukraine, he thinks the Fed may need to be more aggressive soon.
If we want to have an impact on inflation later this year and next year, we need to front-load our rate hikes, he told CNBC.
He thinks the Fed needs to start reducing its bond holdings soon, in addition to the rate hikes.
The central bank's balance sheet has ballooned to $9 trillion, and officials are preparing to start rolling off some of their holdings. The process should start in the next meeting or two.
He said that the economy is in a different position than it was before. Inflation is out of control. We are in a position where we could draw down a large amount of cash out of the system without doing a lot of damage.
Less than two hours after one of his colleagues, St. Louis Fed President James Bullard, said the Fed should raise rates in total at least 300 basis points this year, Waller made his comments. A percentage point is a basis point.
The Fed should have increased the rate by half a point as part of a deliberate policy to curb inflation, according to one policymaker who voted against the increase this week.
Prior to the meeting, he had been pushing for a 50 basis point move, but now says he has a change of heart.
The data was screaming at us to go 50, but the events were telling us to go forward with caution, he said.
The benchmark fed funds rate, which banks charge each other for overnight lending, will be pushed to 1.75% by the end of the year, according to the Federal Open Market Committee.
He thinks the Fed should shoot a little higher. He didn't say how much, but he said that the Fed should try to be above 2% by the end of the year.
The rate hike was the first in three years.
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