Federal Reserve Governor Christopher Waller told CNBC on Friday that the central bank may need to make one or more rate hikes of 50 basis points this year to curb inflation.

Though he voted just 25 basis points this week amid uncertainty over Russia’s invasion of Ukraine, Waller said he thinks the Fed may need to act more aggressively soon.

“I’m really in favor of preloading our rate increases, that we need to move in more accommodation now if we want to have an impact on inflation later this year and next year,” he told CNBC’s Steve Liesman during a “Squawk Box ” interview . “So in that sense, the way to move it forward is to push forward some rate hikes, which would imply 50 basis points at one or more meetings in the near future.”

In addition to the rate hikes, Waller said he thinks the Fed should start reducing its bond holdings soon.

The central bank’s balance sheet has risen to just over $9 trillion, and officials are preparing the process to divest some of their assets. Waller said the process should begin “in the next meeting or two.”

“We are in a different place than before,” he said. “We have a much bigger balance sheet, the economy is in a very different position. Inflation is raging. So we’re in a position where we can take a large amount of liquidity out of the system without really doing much damage.”

Waller’s comments came less than two hours after one of his colleagues, St. Louis Fed President James Bullard, said the Fed would need to raise interest rates by at least 300 basis points in aggregate this year. A basis point is 0.01 percentage point.

Bullard was the only policymaker this week to vote against the quarter-point hike, saying the Fed should have risen half a point as part of a deliberate policy aimed at pushing inflation back to its 40-year high.

Before the meeting, Waller had also pushed for a 50 basis point move, but said he had changed his mind for now.

“The data is basically screaming at us to go 50, but the geopolitical events told you to proceed with caution,” he said. “So those two factors together have kept me from advocating for a 50 basis point increase and the 25 point increase that we introduced.”

The full Federal Open Market Committee also pointed to rate hikes that would push the benchmark fed funds rate, which banks charge each other for overnight loans, to 1.75% by year-end.

Waller said he believes the Fed should shoot a little higher. He didn’t specify by how much, but said he thinks the “neutral rate,” which is neither stimulative nor restrictive, is between 2% and 2.25%, and the Fed would “try to get above that by the end of the year.” to come”.

The rate hike approved this week was the Fed’s first in more than three years.


This post Fed Governor Waller says half-point rate hikes may be necessary as ‘inflation rages’ was original published at “https://www.cnbc.com/2022/03/18/fed-governor-waller-says-half-point-rate-hikes-could-be-needed-to-tame-inflation.html”

LEAVE A REPLY

Please enter your comment!
Please enter your name here