Key facts
- Federal Reserve Governor Christopher Waller stated that a hot core inflation reading this week could lead to a near-term monetary policy tightening.
- Core inflation, excluding food and energy, was running at a 3.4% annual rate in May.
- The Federal Reserve has maintained its target interest rate range of 3.5% to 3.75% throughout the year.
- June consumer inflation data is due Tuesday, with wholesale inflation data on Wednesday.
Federal Reserve Governor Christopher Waller indicated on Monday that the central bank might need to raise interest rates if upcoming inflation data disappoints. In prepared remarks for the New York Association for Business Economics, Waller stated that if "another hot reading on core inflation this week" emerges, the Federal Open Market Committee would need to consider tightening monetary policy in the near term.
Core inflation, which excludes volatile food and energy prices, was running at a 3.4% annual rate in May, an increase from below 3% last October. Waller expressed a commitment to returning inflation to the FOMC's 2% goal but also a determination to avoid overtightening policy and risking a recession. He noted that while there is a credible case for inflation to fall to the 2% target with current policy settings, there is also a credible case that data will show inflation remaining elevated or trending higher, necessitating tighter policy.
The Fed has kept its benchmark interest rate unchanged in a range of 3.5% to 3.75% for the year. Fed officials are divided on future rate moves, with some anticipating hikes and others expecting rates to remain steady. June consumer inflation data is scheduled for release on Tuesday, followed by wholesale inflation data on Wednesday. Economists polled by The Wall Street Journal project that inflation moderated in June due to falling oil prices, though concerns about potential oil price spikes persist.