Christopher Waller, a member of the Board of Governors of the United States Federal Reserve (Fed), has stated his willingness to support a new increase in the benchmark rate at the meeting the U.S. central bank will hold in a month. His objective is to respond to the tightening already priced in by the markets and, in addition, he has left open the option of an increase of up to 50 basis points in the price of money if inflation continues at current levels.
During a conference in London, the Fed official justified his support for holding interest rates unchanged at the October meeting, understanding that the markets had already anticipated a more restrictive scenario. For this reason, he considers it essential not to frustrate those expectations in order to avoid a deterioration in the credibility of the monetary institution.
Along these lines, Waller has underscored the strength of the U.S. economy and the resilience of the labor market, although he has warned that inflation is still excessive and clearly above the 2% target. At the same time, he has pointed out that there are reasons to think that high energy prices could persist over time.
"This means that, even if, as I expect, the monthly inflation rate improves in October, I lean toward supporting an increase of 25 basis points in our official interest rate at the December FOMC meeting," he said.
At the same time, he warned that if the October CPI data resemble those recorded in the previous two months, a shift toward a more aggressive monetary policy could be essential, so that "a 50 basis point increase" in the official interest rate should be considered at the December meeting, since a limited rise of a quarter point would call into question the central bank’s credibility.
On October 28, the Federal Open Market Committee (FOMC) of the United States Federal Reserve decided to leave interest rates unchanged, keeping the target range between 3.75% and 4%, after the increase applied at the previous meeting.