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Fed's Waller Opens the Door to 100 BP Rate Hike at Next Meeting

Economy Jul 14, 2022 11:00AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- The Federal Reserve may need to raise interest rates by a full percentage point at its next meeting, Fed Governor Chris Waller said on Thursday. 

Waller said in a speech in Idaho that while his 'base case' for the next Federal Open Market Committee meeting was a hike of 75 basis points, he was open to a larger move if the economic data warrant it. He pointed in particular to Friday's retail sales report for June, as well as data from the housing market, which has been an area of particular concern for the Fed this year. 

"If that data come in materially stronger than expected it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down," Waller said. 

Waller - who is among the more hawkish of the Fed's Washington-based board of governors -  is the first senior Fed official to suggest that such a dramatic increase could be on the cards for the meeting, which starts on July 26th. In his speech, he reiterated his belief that the Fed can tighten policy aggressively without triggering a recession or derailing the labor market, where the unemployment rate currently stands at 3.6%. 

"In the first half of 2022, the economy has created 2.7 million jobs," he said. "That isn't a picture of a weakening job market."

The Fed raised the target rate for fed funds by 75 basis points at its last meeting. That was its most extreme monetary tightening action since 1994. Calls for the Fed to do more to bring inflation under control have gotten louder since then, especially since Wednesday's news that consumer price inflation topped 9% in June for the first time since 1981. June's producer price report, published earlier on Thursday, also showed factory gate inflation accelerating slightly last month, largely due to the surge in gasoline and diesel prices.

Fed's Waller Opens the Door to 100 BP Rate Hike at Next Meeting
 

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Francis Lim Wei
Francis Lim Wei Jul 14, 2022 12:30PM ET
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