Fed’s Waller sees ‘significant’ rate hike this month, backs data-dependent approach

Federal Reserve Governor Christopher Waller on Friday echoed recent sentiments from his colleagues, saying he expects a big interest rate increase later this month.

He also said policymakers should stop trying to guess the future and instead stick to what the data is saying.

“Looking ahead to our next meeting, I support another significant increase in the policy rate,” Waller said in remarks prepared for a speech in Vienna. “But, looking further out, I can’t tell you about the appropriate path of policy. The peak range and how fast we will move there will depend on data we will receive about the economy.”

Those comments are similar to recent remarks from Fed Chair Jerome Powell, Vice Chair Lael Brainard and others, who said they are resolute in the effort to bring down inflation.

Markets strongly expect the central bank to take up its benchmark borrowing rate by 0.75 percent point, which would be the third consecutive move of that magnitude and the fastest pace of monetary tightening since the Fed began using the benchmark funds rate as its chief policy tool in the early 1990s.

While Waller did not commit to a particular increase, his comments had a mostly hawkish tone.

“Based on all of the data that we have received since the FOMC’s last meeting, I believe the policy decision at our next meeting will be straightforward,” he said. “Because of the strong labor market, right now there is no tradeoff between the Fed’s employment and inflation objectives, so we will continue to aggressively fight inflation.

Waller pointed out welcome signs that inflation is moderating from its highest peak in more than 40 years.

The personal consumption expenditures price index, which is the Fed’s preferred inflation gauge, rose 6.3% from a year ago in July — 4.6% excluding food and energy. That’s still well above the central bank’s 2% long-run goal, and Waller said inflation remains “widespread” even with the recent softening.

He also noted that inflation looked to be softening at one point last year, then turned sharply higher to where the consumer price index rose 9% on a year-over-year basis at one point.

“The consequences of being fooled by a temporary softening in inflation could be even greater now if another misjudgment damages the Fed’s credibility. So, until I see a meaningful and persistent moderation of the rise in core prices, I will support taking significant further steps to tighten monetary policy,” he said.