Federal Reserve Governor Christopher Waller said he would support keeping interest rates at their current level if August data confirm a further easing in inflation pressures. He made the remarks at the Reuters NEXT Newsmaker event in Washington, Reuters reported.
According to Waller, if progress toward the Fed’s 2% inflation target continues, he would be prepared to back leaving rates unchanged. Echoing John Lennon, he said policymakers should “give disinflation a chance” rather than tighten too early.
At the same time, the Fed official did not rule out the opposite outcome. If August inflation comes in high, he said, that could justify further monetary tightening.
Waller noted that the Fed’s policy rate, which has been in the 3.5%–3.75% range since December, is only modestly restraining aggregate demand. As a result, even a slight pickup in inflation could become an argument for raising rates, in his view.
He also acknowledged that inflation remains well above the Fed’s 2% target, although it is continuing to ease gradually.
The U.S. Department of Labor is due next week to release August consumer price index data. That will be the last major inflation report before the Fed’s September 15–16 meeting.
