Frankfurt (awp/afp) – An official of the American central bank (Fed) anticipates several hikes in key rates by half a point by the end of the year, and “until inflation is revenue close to our target of 2%”, believing this possible without increasing unemployment.
“I am in favor of a tightening of an additional 50 basis points (half a percentage point, editor’s note) during several meetings,” said Christophe Waller, one of the Fed governors, in a speech on Monday. virtual in front of Goethe University in Frankfurt, Germany.
The Fed usually raises interest rates in quarter-percentage-point increments, but in early May resorted to a sharp half-point hike, for the first time since 2000, to stem the record inflation.
“I will not take the 50 basis point hikes off the table until I see inflation moving closer to our 2% target,” he said.
Rates, which are in a range of 0.75 to 1.00%, should, according to him, be raised by the end of the year until they exceed the so-called “neutral” level, considered to be between 2.00 and 3.00% approximately.
He said he was on the same line as market expectations, citing rates up 2.5 points in total over the year, from the range of 0 to 0.25% in which they were until in March, at 2.5-2.75%.
“If we have to do more, we will do it,” he said.
Such a movement should make it possible to reduce “the demand for products and labour, (align it) more with supply and (help) thus to control inflation”, he underlined.
Mr. Waller also considered that the “soft landing” promised by Fed Chairman Jerome Powell was possible: “I remain optimistic that the solid labor market can support higher (key) rates high without a significant increase in unemployment”.
And, as fears grow of the US economy sliding into recession, following a drop in gross domestic product in Q1, he was also reassuring.
This contraction “was due to fluctuations in two volatile categories, inventories and net exports, and I do not expect them to recur”.
The Fed favors the PCE index, which showed inflation of 6.3% over one year in April, lower than the 6.6% in March. Over one month, the slowdown is even more marked, at 0.2% against 0.9%.
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