Fed Governor Waller Signals a Full-Point Rate Increase is Possible, but Not Yet

Federal Reserve Board Christopher Waller said he supported raising the central bank’s policy rate in July by the same amount as in June, but further moves are needed if economic data continues to soar. Suggested that it could be.

The Federal Reserve raised interest rates by 0.75 percentage points last month. This is the biggest rise since 1994, to rapidly slow borrowing and spending and cool the economy, which is experiencing the fastest inflation in 40 years. Investors expected similar moves at the central bank’s July 26-27 meeting, but this week’s new inflation reports were unexpectedly high.

Now, the potential for traders to make even bigger moves (the largest increase since the 1980s, full percentage points) is skyrocketing. However, Waller suggested that he was not yet ready to support such a large-scale move.

“I have CPI data at hand, so I’ll support an additional 75 basis points increase,” Waller said in a speech prepared for delivery.

Such a move would raise interest rates to what the Fed considers to be a neutral setting: points where they are no longer helping the economy, and if interest rates are pushed higher, they will begin to curb it.

However, Waller added, “There will be important data releases on retail sales and housing before the July meeting,” suggesting that we can support even greater moves as circumstances change.

“If that data is significantly stronger than expected, we’ll be inclined to a bigger boost at the July meeting,” he said.

Several officials, including Loretta Mester, President of the Federal Reserve Bank of Cleveland, Mary C. DailyThe Federal Reserve Bank of San Francisco’s governor has now refused to support such a large-scale move, but has not ruled it out altogether. Instead, they are based on incoming data, especially the potential to make a big move in research on retail sales and consumer inflation expectations to be released on Friday.

The Fed remains vigilant as inflation accelerates and becomes more prevalent, past the time many expected it to ease.

The consumer price index rose 9.1% in the year to June, surpassing economists’ expectations of 8.8%. This was mainly caused by the subsequent chilling rise in gas prices, but the underlying details of the report suggest that rent, food, and a range of services are also becoming more expensive, inflation. Shows that is becoming more tenacious. Worrying news for central bankers.

The report was “a disappointment for Major League Baseball,” Waller said.

“Inflation needs to be our focus because the daily spending and pricing that people and businesses make depends on whether they believe the Fed is fully committed to that inflation,” he said. Said.