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Fed may cut size of rate increases, but is not 'softening' inflation fight, Waller says

Economy Nov 13, 2022 06:35PM ET
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© Reuters. FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo

WASHINGTON (Reuters) - The U.S. Federal Reserve may consider slowing the pace of rate increases at its next meeting but that should not be seen as a "softening" in its commitment to lower inflation, Federal Reserve Gov. Christopher Waller said on Sunday.

Markets should now pay attention to the "endpoint" of rate increases, not the pace of each move, and that endpoint is likely still "a ways off," Waller said in response to a series of questions on monetary policy at an economic conference organized by UBS in Australia. "It depends on inflation."

"We're at a point we can start thinking maybe of going to a slower pace," Waller said, but "we're not softening...Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there."

A report released last week showing slower than expected inflation in October was "good news," but was "just one data point" that would have to be followed with other similar readings to show convincingly that inflation is slowing, he said.

The 7.7% annualized increase in inflation recorded in October is still "enormous," Waller said, noting that even if the Fed scaled back from three quarter point increases to a half point increase at its next meeting, "you're still going up."

"We're going to need to see a continued run of this kind of behavior and inflation slowly starting to come down before we really start thinking about taking our foot off the brakes," Waller said, adding that he has been further convinced the Fed is on the right path because its rates increases so far have not "broken anything."

The Fed has raised rates a total of 3.75 percentage points this year beginning in March, including four three quarter point increases, a rapid shift in monetary policy aimed to cool the worst surge of inflation since the 1980s.

"For all the talk of crashing the economy and breaking the financial markets. It hasn't done that," Waller said.

Analysts and economists have warned that the monetary tightening will further the risk of recession, impacting employment.

U.S. Senate Banking Committee Chair Sherrod Brown last month urged the Federal Reserve to be careful about tightening monetary policy so much that millions of Americans already suffering from high inflation also lose their jobs.

Fed may cut size of rate increases, but is not 'softening' inflation fight, Waller says
 

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Comments (8)
John XYZ
John XYZ Nov 14, 2022 3:29AM ET
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This gentlemen from FED are keep lying. Inflation is dropping hard, and next month report will be similar with this month, with another approximately half of percent drop. The inflation trend ( annual inflation based on last 2-3-4 months values) is somewhere between 2.x to 3.x percent. And that is the reality that FED continue to lie about. 7.7 is theoretically the value from the past. The path we are now is between 2 to 3 percent, unless FED continue from extreme to extreme bringing unnecessary shock to economy. So what are FED real plans, that they don't share with us?
BD
BD Nov 14, 2022 12:17AM ET
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This is the definition of pivoting. Putin is losing the war. Xi is pivoting on zero COVID lockdowns. Both are contributing big time to inflation this year, especially CPI. The Feds will 100% pivot when Putin is humiliated out of Ukraine by mid 2023. Xi has no reason to keep zero COVID to increase inflation on the West to demoralize Western resolve in helping Ukraine now that Putin is guaranteed to lose with US HIMARS pounding Russian supplies. Can't fight a war without supplies. That's why they gave up Kherson.
paul max
paul max Nov 13, 2022 10:46PM ET
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the tightrope act of western centralbanks, with their absurd financial policys,moneyprinting, excessive depts compare to Gdp , is comming to an end. the tightrope act btw intrestrates and moneysupply will end in a fiasko , exceding 2008 financial turmoil. inflation will stick above the target for years ,and when usd demand will disapear or decrease ,it will bring further pressure in the longrun. this absurd monetary policy the last 2 decades was making the rich more rich, to an abnormal and healthy level, and leave the middle class and lower without any gains, and for amny with loos of purchasingpower. The financialmarkets blackmail day by day the policys of western centralbank in its hunger for money and easing policys. the real economy is far less important than this financial mafia
Todd Gray
Todd Gray Nov 13, 2022 8:22PM ET
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we only have full employment, because 8% of the workforce retired during covid. so the ultra low unemployment rate is deceiving.
ZS Beck
ZS Beck Nov 13, 2022 8:22PM ET
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They called labor shortage. It will just get worse without immigration. More baby boomers will retire in the next 8 years. 75 million of them.
Bill Bill
Bill Bill Nov 13, 2022 8:11PM ET
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Correction. “Not softening inflation fight talk”
matt ozan
matt ozan Nov 13, 2022 6:30PM ET
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Just like they were not “thinking about thinking about rate hikes” in early 2021, now they are not thinking about possibility of putting emerging markets into debt explosion. They should have at least taken back the 1% emergency rate cut (March 2020) in early 2021 when vaccinations were well underway. Once again they will be proven wrong and will not be able to go beyond 5%. Fed is such an independent and incompetent organization that you can’t fire the fed chair and you can’t put him on trial for bringing the whole world into economic disaster. The latest major dislocations in the multi trillion $ bond market last week shows the fed will be proven wrong.
Jim Herndon
Jim Herndon Nov 13, 2022 6:30PM ET
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Excellent reply, you are so right. It’s just amazing that the markets can’t read or refuse to accept the reality of the situation
jason xx
jason xx Nov 13, 2022 6:24PM ET
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Do these fed chumps ever stop talking?
Peter John
Peter John Nov 13, 2022 6:12PM ET
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It takes time that the rate can be absorbed. Even its increased once till 6% that the result will not show up next month. But it needs to be soft at some point otherwise its too late and the World economies will be collapse that they cant be cured soon. Thats in the case of companies bankrupcy…
 
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