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Fed Governor Waller says half-point rate hikes may be needed as ‘inflation is raging’

On Friday, Federal Reserve Governor Christopher Waller told CNBC that the central bank may need to adopt one or more 50 basis point interest rate hikes this year to bring inflation under control.

Although he voted this week for a move of just 25 basis points due to uncertainty over Russia’s invasion of Ukraine, Waller said he thinks the Fed may need to be more aggressive soon. .

“I’m really supportive of the anticipation of our rate hikes, that we need to do more hosting withdrawals now if we’re going to have an impact on inflation later this year and next year,” he said. he told CNBC’s Steve Liesman during a live “Squawk Box.” maintenance. “So in that sense, the way to go is to push forward some rate hikes, which would involve 50 basis points at one or more meetings in the near future.”

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

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

“We are in a different place than we were before,” he said. “We have a much larger balance sheet, the economy is in a much different position. Inflation is raging. So we are in a position where we could actually take a lot of cash out of the system without really doing a lot of damage. . “

Waller’s comments came less than two hours after fellow St. Louis Fed President James Bullard said the Fed should raise rates in total by at least 300 basis points. This year. One 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 hiked half a point as part of a deliberate policy to rein in inflation at its highest level in 40 years.

Prior to the meeting, Waller had also pushed for a 50 basis point move, but said he had changed his mind for the time being.

“The data is basically screaming at us to go 50, but geopolitical events were telling you to tread carefully,” he said. “So those two factors combined made me not advocate a 50 basis point hike and support the 25 basis point hike that we have adopted.”

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

Waller said he thinks the Fed should shoot a little higher than that. He did not specify by how much but said he believed the “neutral rate” which is neither stimulative nor restrictive is between 2% and 2.25% and that the Fed should “try to be at the above by the end of the year”.

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

Fed Governor Waller says half-point rate hikes may be needed as ‘inflation is raging’

Source link Fed Governor Waller says half-point rate hikes may be needed as ‘inflation is raging’

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