Fed’s Waller wants another 75 basis point hike for ‘all-in’ inflation fight

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By Anne Sapphire

(Reuters) – Federal Reserve Governor Christopher Waller on Saturday became the latest U.S. central banker to pledge an all-costs approach to tackling inflation, three days after the Fed hiked rates interest rate by three-quarters of a percentage point and announced further increases. come.

“If the data comes in as I expect, I will support a similarly sized decision at our July meeting,” Waller said in remarks prepared for delivery at a Society for Computational Economics conference in Dallas. “The Fed is ‘all in’ to restore price stability.”

Waller was an early Fed advocate for a quicker pivot away from the ultra-loose monetary policy enacted during the coronavirus pandemic, urging to begin the process in August, when the Fed’s key rate target was set. pinned near zero and it was buying $120 billion in bonds every month to prop up the economy.

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Although the Fed began to back away from its accommodative policy late last year, it wasn’t until March that it gradually ceased its asset purchases and began raising interest rates. interest in stemming what is now the highest inflation in 40 years.

Waller’s hawkish views currently reflect the central bank’s fundamental belief that rapid policy tightening is needed, even at the risk of causing a downturn that many see as increasingly likely.

On Friday, the Fed called its fight against inflation “unconditional,” and Atlanta Fed Chairman Raphael Bostic, who had been the Fed’s most dovish policymaker, said “we’ll do whatever we can.” ‘it takes’ to bring inflation down to the Fed’s 2%. target.

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Inflation, as measured by the personal consumption expenditure price index, is more than three times that level.

The Fed’s rate hike on Wednesday, its biggest hike in more than a quarter century, raised its overnight rate target to a range of 1.50% to 1.75%.

Forecasts from policymakers show that most of Waller’s colleagues at the Fed now expect that rate to hit at least 3.4% over the next six months. A year ago, most thought it should stay at zero until 2023.

Some critics attribute the Fed’s delay in tightening policy on a framework it adopted in 2020 that ruled out raising interest rates in response to falling unemployment, as the Fed had done before even though the actual inflation figures remained low.

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Waller argued on Saturday that it was the Fed’s overly specific promises about when it would end its asset purchases that were at issue.

Structural changes in the economy mean there is a “decent chance” that the Fed will have to cut its key rate to zero again in the future and buy bonds to fight even a typical recession, he said. he declares.

He said he would support next time around less restrictive promises around an end to bond purchases and more clarity on not just when the Fed would start to tighten policy, but also how quickly.

(Reporting by Ann Saphir; Editing by Paul Simao)

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