Fed official open to slowing rate hikes
WASHINGTON, D.C.: Christopher Waller, a key Federal Reserve (Fed) official, on Wednesday (Thursday in Manila) added his voice to a rising number of Fed officials who have suggested that the United States central bank is likely to slow the pace of its interest rate hikes beginning in December.
Waller, a member of the Fed’s Board of Governors, said he was open to raising the central bank’s key rate by a half-point next month in light of evidence that inflation might be cooling.
At each of its four most recent policy meetings, the Fed has 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.
At the same time, Waller stressed that inflation remained painfully high. And he cautioned that there had been occasions in the past 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 shortterm 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, automobile loans and credit cards, among other loans. Fed officials intend the higher rates to slow borrowing and spending and cool inflationary pressures.
Waller’s remarks followed comments earlier on Wednesday from Mary Daly, president of the Federal Reserve Bank of San Francisco. 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 had so far been no discussion among Fed officials about whether to pause their rate hikes if inflation continued to moderate.
“Pausing,” Daly said, “is off the table right now. It’s not even part of the discussion.”
Both Waller and Daly took pains, like Chairman Jerome Powell at a news conference this month, to emphasize that rates will ultimately go higher, even as the Fed raises them in smaller increments.
Waller also underscored his view that the inflation report for October, which showed slower price increases, was just one data point and not necessarily solid evidence that inflation was declining.
“I cannot emphasize enough that one report does not make a trend,” he said. “It is way too early to conclude that inflation is headed sustainably down.”
Waller noted that inflation had shown signs of slowing late last year before heading higher again.
“I will not be head-faked by one report and will continue to watch the data between now and the December [Fed] meeting,” he said.
On Monday, Vice Chairman Lael Brainard said a smaller rate increase would “probably be appropriate, soon.”