The Fed Governor Chris Waller recognized that economic risks from the war in Ukraine prompted him to vote for a quarter-percentage-point hike in interest rates at this week’s meeting, instead of dissenting for a larger half-point.
“The data is crying out for us to go up 50 (basis points), but geopolitical events told us to go with caution,” Waller told CNBC.
However, Waller maintained that in the coming months he would favor a series of hikes of half a percentage point to “advance” the tightening of monetary policy and have a faster impact on inflation.
Fed officials raised interest rates this week for the first time in nearly four years and signaled more hikes are on the way. as the central bank withdraws support provided during the coronavirus pandemic, and works to tame inflation at 40-year highs.
For his part, the president of the Saint Louis Federal Reserve, James Bullard, who dissented this week because he favors an increase of half a point, said this Friday that officials should raise the Fed’s overnight lending rate to more than 3% this year, to catch up with soaring inflation.
Following Wednesday’s decision, the Fed’s target rate is now 0.25-0.50%.
Bullard said that He was not only in favor of a half-point hike this week, but of raising rates at a pace that would require a half-point hike in five of the six remaining Fed meetings this year.
“The US economy has proven especially resilient” in the face of the pandemic and geopolitical risks, Bullard said in a statement explaining his disagreement.
With inflation, by one key measure, above 6%, triple the Fed’s 2% target, Bullard said more Fed activity was needed. “to prudently manage the macroeconomic situation in the United States.”
Although most Fed officials see six more quarter-point interest rate hikes this year, seven of the current 16 Fed policymakers, like Bullard, think rates should rise further by the end of the year.
“I am in favor of anticipating rate increases… More than promising it, it must be done”, said.
Although he did not specify where he would like the federal funds rate to end the year, Waller did stress that he would prefer to rise above the 2% to 2.25% level that he sees as neutral for the economy.
Source: Ambito
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