Following the Federal Reserve’s recent decision to pause its aggressive rate-hiking campaign, Fed Governor Christopher Waller and Richmond Fed President Thomas Barkin have both suggested that further rate increases are necessary to achieve the central bank’s target of 2% inflation.
Despite the recent pause, both officials have made it clear that they believe continued rate hikes are necessary to ensure that inflation remains under control. This stance is likely to be welcomed by investors who have been concerned about the potential for rising inflation to disrupt the economy.
While some market watchers have suggested that the Fed may be nearing the end of its tightening cycle, Waller and Barkin’s comments suggest that the central bank is still committed to gradually raising interest rates in the coming months. Investors will be closely watching for any further indications of the Fed’s future policy direction in the weeks ahead.
Federal Reserve officials, Christopher Waller, and Thomas Barkin, have expressed concerns about the state of the US economy. Waller highlighted that policy rates have had limited effects on certain parts of the economy. He also noted that although the labor market is strong, the core inflation rate is not showing any significant movement, which may require further tightening to address.
Barkin echoed Waller’s sentiment, noting that he is still concerned about the current state of the economy. The lack of movement in core inflation rates is a cause for worry, and both officials believe that more tightening measures may be necessary to address this issue.
Their concerns were expressed during a moderated discussion hosted by the Norges Bank and the International Monetary Fund in Oslo. The discussion focused on the current state of the US economy and the potential impact of policy rates on various sectors.
Overall, both Waller and Barkin’s comments suggest that the US economy may require further intervention to address its current challenges. The lack of movement in core inflation rates is a particularly worrying sign, and it remains to be seen what steps will be taken to address this issue going forward.
The Federal Reserve’s latest Summary of Economic Projections indicates that the majority of officials predict the bank’s benchmark lending rate will reach a range of 5.63-5.87% by 2023, implying that there will probably be two more quarter-point rate hikes this year. However, officials had previously expressed concern over inflation not hitting 2% yet in speeches leading up to the Fed’s decision on Wednesday. This projection suggests that the Fed is taking a cautious approach to economic growth and inflation.
The Fed is likely to continue to monitor inflation closely, and any deviation from its projections could result in a change to its interest rate policy. It remains to be seen how the economy will fare in the coming months, but the Fed’s projections provide an indication of its current thinking on the state of the economy.
Bottom Line
At a recent conference in Norway, Christopher Waller, a member of the Federal Reserve’s Board of Governors, emphasized that the Fed’s interest-rate strategy would not be affected by stresses in the banking sector. Despite the challenges faced by banks, such as rising interest rates and higher loan defaults, Waller believes that the Fed already has the necessary tools to address any financial instability that may arise.
