Fed Governor Waller said the Fed would only “brake off” if inflation continued to fall.
In this tightening cycle, the Fed faces a key decision: Should it slow the pace of interest rate hikes or continue to tighten sharply?
Fed Governor Waller believes soThe Fed may consider slowing the pace of rate hikes at its next meeting, but the anti-inflation won’t stop and will continue for some time.
On Sunday, according to media reports, Waller, who has permanent voting rights on the FOMC during his tenure, told a UBS economic conference:
The market should focus on the “end” of rate hikes, not the “speed” of each hike.
The Fed “has a long way to go” before it stops raising rates, which will depend on inflation.
Inflation continues to fall, the Fed will ‘hit the brake’
Regarding the current situation, Waller said:
We’re at a point where we can start thinking about slowing down, but we don’t give up…
The market should stop focusing on speed and start focusing on where the end point will be.
The US inflation report for October released last week showed that both CPI and core CPI slowed more than expected. According to Waller,Inflation in October was lower than expected, which is good news, but it is only a point number and more similar data is needed to show that inflation is slowing down.
Waller said the 7.7% year-on-year rise in the CPI in October was still substantial and even if later data showed the rise in inflation would narrow by three quarters to 0.5%, l inflation would still be on the rise.
Therefore, Waller stated:
We need to see a sustained decline in inflation before we really start thinking about curbing.
This is consistent with the statements of many other top Fed officials. On Thursday, several top Fed officials voiced their support for slowing the pace of interest rate hikes, underlining their determination to curb high inflation.He stresses that slowing the pace of rate hikes does not mean more accommodative policy.Overall,Senior Fed officials are generally dovish in their statements。
Where does the excursion end?
When asked if rates would rise above 5%, Waller replied,That will depend on how inflation pans out, which now determines where that number pans out.
San Francisco Fed Chairman Daly also said in an interview:Interest rates are likely to peak at at least 5%.
In September, officials had forecast an average rate of 4.5% by the end of this year and a peak rate of 4.6% next year, which was the peak of the current rate-hiking cycle.That means a 50 basis point hike in December and a final 25 basis point hike next year. The bitmap will be updated next month.
In addition, the recent spate of layoffs in the United States, analysts and economists have warned that monetary tightening will further exacerbate the risk of a recession. Last month, Brown, chairman of the US Senate Banking Committee, “urged” the Federal Reserve’s Powell to be “cautious” when he raises interest rates and shrinks his balance sheet or else millions of Americans suffer from high inflation they will lose their jobs.
But Waller believes that while people are talking about economic collapse and financial market collapse, they’re not currently seeing it.
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