Key US Federal Reserve official Christopher Waller on Wednesday added his voice to a rising number of other Fed officials who have suggested that the central bank is likely to start slowing the pace of its interest rate hikes next month.
Waller, a member of the Fed’s Board of Governors, said he was open to raising the Fed’s key rate by a half-point next month in light of evidence that inflation is cooling.
At each of its four most recent policy meetings, the Fed raised its benchmark rate by an aggressive three-quarters of a point. The cumulative effect has been to make many consumer and business loans costlier and to raise the risk of a recession.
Photo: AP
At the same time, Waller said that inflation remains painfully high, adding that there have been occasions when economists thought inflation was falling only to see prices reverse course and accelerate again.
“The data of the past few weeks have made me more comfortable considering stepping down to a [half-point] hike,” Waller said in a speech in Phoenix, Arizona. “It is important to remember that this would still be a very significant tightening action.”
The Fed has raised its key short-term rate this year at its fastest pace since the early 1980s — to a range between 3.75 percent and 4 percent, the highest level in about 15 years.
Those hikes have increased borrowing costs for mortgages, auto loans and credit cards. Fed officials intend the higher rates to slow borrowing and spending, and to cool inflation pressures.
Waller’s remarks followed comments earlier on Wednesday from Federal Reserve Bank of San Francisco president Mary Daly.
Daly said in an interview with CNBC that the Fed was likely to raise its short-term rate at least a full percentage point above its current level.
She also said there has so far been no discussion among Fed officials about whether to pause the rate hikes if inflation continued to moderate.
“Pausing is off the table right now. It’s not even part of the discussion,” she said.
Waller and Daly took pains, as did US Federal Reserve Chair Jerome Powell at a news conference this month, to emphasize that rates could go higher even as the Fed raises them in smaller increments.
US Federal Reserve Vice Chair Lael Brainard said a smaller rate increase “will probably be appropriate soon.”
Market traders now foresee an 85 percent likelihood of a half-point rate increase at the Fed’s meeting next month, a CME Group tracking of investor expectations showed.
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