Fed Governor Christopher Waller warns that interest rates could go higher than expectations

Fed Governor Christopher Waller warns that interest rates could go higher than expectations

Christopher Waller, U.S. President Donald Trump’s nominee for Governor of the Federal Reserve, speaks during a Senate Banking Committee confirmation hearing in Washington, DC, U.S., Thursday, Feb. 13, 2020.

Andre Harrer | Bloomberg | Getty Images

On Wednesday, Federal Reserve Governor Christopher Waller spoke strongly about inflation, warning that the fight is not over and could lead to higher interest rates than markets anticipate.

Addressing an agribusiness conference in Arkansas, Waller said the January jobs reportshowing growth in non-farm payrolls of 517,000, said the labor market is “robust” and could fuel consumer spending that would keep upward pressure on inflation.

Therefore, he said the Fed should maintain its current course of action, which has seen eight interest rate hikes since March 2022.

“We’re seeing this effort starting to pay off, but we still have some way to go,” Waller told Arkansas State University’s agribusiness conference in prepared remarks. “And it could be a long fight, with higher interest rates than some currently expect. But I will not hesitate to do what is necessary to do my job.”

The comments come a week after the Federal Open Market Committee responsible for setting rates approved a quarter-percentage-point increase that took the benchmark lending rate to a target range of 4.5% to 4 .7%, the highest since October 2007.

Markets were encouraged by recent remarks from Fed Chairman Jerome Powell, who said he saw signs of disinflation. Inflation hit a 41-year high last summer, forcing the Fed to back down from its insistence that price increases were “transitional” and within the current tightening posture.

But Waller said he sees inflation still too high as he expects only moderate economic growth this year. He noted that payroll data is “moving in the right direction,” but not enough for the Fed to cut rates.

“Some people think inflation is going to come down pretty quickly this year,” he said. “That would be a welcome result. But I don’t see signs of this rapidly declining economic data, and I’m ready for a longer fight to get inflation back to our target.”

Markets currently expect the Fed to approve two more rate hikes – by a quarter point each at the March and May meetings, according to data from the CME Group. They then expect a quarter point reduction by the end of the year as the economy slows and possibly drifts into recession.

Waller didn’t elaborate on his view on where rates are headed, saying only that he sees tight monetary policy lasting “for some time,” a phrase used repeatedly by Powell and other policymakers. the Fed.