Governor Christopher Waller of the Federal Reserve stated on Monday that he expects interest rate hikes to continue through the rest of the year to keep inflation under control.
In particular, the central bank official stated that hikes over the “neutral” level, which is neither helpful nor restrictive for growth, would be supported.
According to Fed officials’ estimates from March, the neutral rate is 2.5%, which indicates Waller expects rates to rise at least another 2% points from here.
In remarks delivered in Frankfurt, Germany, Waller remarked, “Over a longer length of time, we will learn more about how monetary policy affects demand and how supply constraints are evolving.” “I am prepared to do more if the data suggest that inflation remains stubbornly high.”
The words back up the sentiment expressed in the minutes of the Federal Open Market Committee’s rate-setting meeting in early May. Officials feel “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook,” according to the meeting statement.
The Fed is expected to boost benchmark borrowing rates to a range of 2.5% -2.75%, in line with a neutral rate, according to market expectations.
If inflation continues to climb, the Fed is likely to raise interest rates even more. The federal funds rate is currently set at a range of 0.75% to 1%.
As per the minutes, policymakers expect rates to rise by 50 basis points over the next few meetings. Waller said he agrees with the Fed’s stance, which is aimed at taming inflation, which is nearing its highest level in more than 40 years.
“In particular, I am not taking 50 basis-point hikes off the table until I see inflation coming down closer to our 2 percent target,” Waller said.
“And, by the end of this year, I support having the policy rate at a level above neutral so that it is reducing demand for products and labor, bringing it more in line with supply and thus helping rein in inflation,” he added.