ATFX - Federal Reserve Governor Waller: Two more rate hikes are needed this year, backing a July rate hike

Waller said the resilience of the job market and the economy gives the Federal Reserve room to raise interest rates further.If there are two more good CPI data, it may mean "stop" interest rate hikes。

Federal Reserve Governor Paul Waller delivered the latest remarks on the economic outlook. He said,In favor of a rate hike at the July FOMC meeting, the Fed needs to raise interest rates twice more this year (25 basis points each) to bring inflation down to its target level, the resilience of the job market and the economy gives the Fed room to raise interest rates further, and the need to maintain tightening policy "for a while".

In remarks prepared for a dinner hosted by New York University's money market experts on Thursday, Waller said:

"I think two more rate hikes within the target range of 25 basis points each will be necessary over the four remaining meetings this year to keep inflation moving towards our target. In addition, I think we will need to keep policy constraints in place for some time to keep inflation stable around the 2 per cent target. With another month of data available to assess lending conditions since the June meeting, I am more confident that the banking turmoil will not cause significant problems for the economy and I see no reason why the first of these two rate hikes should not come at the meeting later this month."

Waller said a strong balance sheet allows the economy to withstand strong Federal Reserve interest rate hikes.A soft economic landing is still possible。

The Federal Reserve is widely expected to resume raising interest rates at its July 25-26 policy meeting, following a 15-month pause in its tightening campaign in June. But the latest data released on Wednesday showed inflation falling to its lowest level since 2021, raising doubts about whether Fed officials will choose to raise rates further on that basis. In his speech, Waller noted that contrary to conventional wisdom, the five percentage points the Fed has raised since the start of 2022 has already had an impact on the economy, meaning the Fed should continue to tighten policy rather than wait to see if past moves will eventually slow economic growth. He said:

"If people think that most of the effects of last year's tightening have been passed through to the economy, then we can't expect this tightening to slow demand and inflation further. Putting rate hikes on hold now as you wait for all sorts of lagged effects is like standing on a platform waiting for a train that has already left the station."

While investors see a rate rise later this month as almost a DingTalk on the board, Wall Street is more sceptical of further tightening after that. Mr. Waller, who has been one of the Fed's more hawkish officials in recent years, argues that "the strength of the labour market and the overall stable performance of the US economy give us room to tighten further".

After the July meeting, he said, "if inflation does not continue to show progress and economic activity shows no clear signs of slowing, a second rate hike of 25 basis points should be sooner rather than later, but it is a decision for the future."

Waller emphasized,The September Federal Reserve meeting was a meeting that had a substantive impact on monetary policyHe suspects that core inflation is now rising structurallyIf there are two more good CPI data, it may mean "stop" interest rate hikes。