Fed Official Warns of More Rate Hikes on ‘too Hot’ Data

AFP-Jiji

11:15 JST, March 4, 2023

WASHINGTON (AFP-Jiji) — The U.S. Federal Reserve may have to raise interest rates to a higher level than earlier anticipated if “data reports continue to come in too hot,” Fed Gov. Christopher Waller warned Thursday.

This comes as data released in February showed that job gains surged unexpectedly, while revised figures indicated that inflation slowed less than previously reported, he said in prepared remarks at the Mid-Size Bank Coalition of America.

“Although inflation has been coming down since the middle of last year, the recent data indicates that we haven’t made as much progress as we thought,” said Waller.

Recent numbers underscore the view “that the fight to bring inflation down to our 2% target will be slower and longer than many had expected just a month or two ago,” he added.

Among other issues, policymakers have been concerned about wage growth, as it feeds into inflation via labor costs.

If job creation falls to “a level consistent with the downward trajectory seen late last year” and inflation pulls back significantly, Waller said, he would endorse raising the federal funds rate to a target range between 5.1% and 5.4%.