Federal Reserve Governor Christopher Waller said on Tuesday that the latest round of strong economic data will give the central bank some time to decide whether it needs to raise interest rates further to rein in inflation.
“It’s been a good week based on the data we got last week, and the bottom line is whether it will allow us to proceed cautiously,” Waller told CNBC’s Steve Lessman during an interview on “Squawk Box.” “We can just sit back and wait for the data and see if things continue.”
The highlight of the data was the nonfarm payrolls report released on Friday, which showed a better-than-expected gain of 187,000 jobs in August, while average hourly wages rose just 0.2% during the month. , less than expected.
Earlier in the week, other reports showed the Fed’s inflation target rose just 0.2% in July. Job prospects, a key measure of labor market tightness, fell to their lowest level since March 2021.
“The biggest problem is inflation,” Waller said. “We had two good reports in a row.” The important thing now is to “see whether this low inflation represents a trend or just an anomaly or a coincidence”.
Waller is generally considered one of the most aggressive members of the Federal Open Market Committee, which sets interest rates, meaning he favors tighter monetary policy and higher interest rates while the central bank fights inflation. In the summer of 2022 it was the highest rate in 2022. For over 40 years.
While he is encouraged by recent reports on price direction, he said they also suggest inflation may be rising until the Fed is confident it can keep interest rates higher.
“It depends on the data,” Waller said when asked if the price hike could stop. “We have to wait and see if this inflationary trend continues. We’ve been burned twice before. In 2021, we fell and then grew. At the end of 2022, we saw it fall and then wipe everything out.
“So I want to be very cautious about saying we’re done with inflation until we see a few months down the road before we say we’ve done anything,” he added.
Markets are almost certainly assessing the chances of the Fed ignoring a rate hike at its September 19-20 meeting. However, a 43.5% increase is likely between October 31 and November. 1 session, according to CME Group Trace for futures prices, shows some uncertainty. Goldman Sachs said this week that it expects the Fed to end.
“I don’t think another interest rate hike is going to push the economy into a recession if it seems necessary,” Waller said. “Even if we raise interest rates again, it is not clear that there is a risk of major damage to the job market.”
Waller’s comments came less than two weeks after Federal Reserve Chair Jerome Powell said that inflation was too high and that further increases in interest rates may be needed, although he indicated that lawmakers would “exercise caution” before acting. Will be careful.
