Waller: Inflation too high to stop rate increases

Federal Reserve Governor Christopher Waller said today that he does not support stopping increases in the federal funds rate unless there is “clear evidence” that inflation is heading towards the Fed’s 2% objective. However, whether the Federal Open Market Committee should hike the rate or pause at its upcoming June meeting will depend on what the data says over the next three weeks, he added.

In a speech at a California economic conference, Waller laid out the case for hiking, lowering and pausing the rate. He said the Fed hasn’t made much progress in fighting inflation—which would argue for an increase—but added that caution is warranted because there is a high level of uncertainty about how credit conditions are evolving. Still, “I do not expect the data coming in over the next couple of months will make it clear that we have reached the terminal rate,” he said. Waller noted that new figures on the labor market, wages and inflation will come out before the FOMC’s June 13-14 meeting.

“Fighting inflation continues to be my priority,” Waller said. “We worked very hard over the past year to quickly raise the target range for the federal funds rate from near zero to about 5%. While we are seeing some tentative signs of cooling in the labor market, I am determined to continue to use our policy tools as needed to appropriately bring inflation down to 2%.”