Key facts
- Federal Reserve Governor Christopher Waller suggested that interest rates may need to be raised in the near term.
- Waller's remarks are contingent on upcoming inflation data showing persistent elevation above the 2% target.
- He expressed concern about broadening price pressures across the economy.
- Waller cautioned against being "lackadaisical" in response to unfavorable inflation data.
- The Fed held rates steady at its last meeting, with policymakers divided on future rate increases.
Federal Reserve Governor Christopher Waller indicated that the U.S. central bank might need to increase interest rates in the near term if upcoming economic data show inflation continuing to run significantly above the 2% target. Waller, speaking in remarks prepared for the New York Association for Business Economics, characterized monetary policy as being at a "crossroads" where decisions will be guided by new information.
He expressed concern that recent inflation reports suggest price pressures are broadening throughout the economy, potentially reflecting more systemic inflation that would necessitate tighter monetary policy. While acknowledging the risk of raising rates prematurely and triggering a recession, Waller emphasized the need to avoid repeating past mistakes by waiting too long to address rising price pressures, especially with inflation expectations remaining anchored.
Waller stated that it would require "several months of lower readings" to feel confident that inflation is moving in the desired direction. He noted that the Federal Reserve held interest rates steady at its June meeting, with policymakers at that time evenly divided on the likelihood of a rate increase later in the year.