Fed’s Waller suggests wait-and-see approach to future rate hikes

The Federal Open Market Committee has room to “wait, watch and see” what the economy does before deciding whether to once again raise the federal funds rate, Federal Reserve Governor Christopher Waller said today. During a speech in the U.K., Waller pointed to several economic factors that showed progress in the Fed’s battle against inflation, but he also cited causes for concern, such as a recent jump in housing services prices and the fact that inflation has proven stubbornly persistent.

“I will be looking carefully at the data to see whether the real side of the economy begins to cool off or whether prices, the nominal side of the economy, heat up. As of today, it is too soon to tell,” Waller said. “Consequently, I believe we can wait, watch and see how the economy evolves before making definitive moves on the path of the policy rate.”

Still, Waller cautioned that should the economy continue showing strength, and if inflation remains persistent, more policy tightening is likely needed. “So I will be watching to see if core inflation comes in higher than expected, perhaps sustained by continued strength in spending and investment or, if demand and the real economy slow, moderating core inflation,” he said. The FOMC next meets Oct. 31-Nov. 1.