FOMC’s Waller favors 25 basis point rate hike

Federal Reserve Governor Christopher Waller said today he favors raising the federal funds rate by 25 basis points at the next Federal Open Market Committee meeting at the end of January. The FOMC has raised the rate by 75 and 50 basis points at its most recent meetings, but Waller said he was cautiously optimistic that inflation may be slowing, so a lower increase would be appropriate.

“After climbing steeply and using monetary policy to significantly raise interest rates throughout the economy, it was apparent to me that it was time to slow, but not halt, the rate of ascent,” Waller said during a speech at the Council on Foreign Relations in New York City.

Waller said there is evidence that FOMC’s decision to raise interest rates has begun to dampen demand and economic activity, helping drive down inflation. Industrial production has declined for the past two months, the services industry is reporting a widespread slowdown in activity, and growth in consumer demand has begun to slow. He also remained optimistic the FOMC can still achieve a “soft landing” and avoid a recession. The committee’s next meeting is Jan. 31-Feb. 1.