WASHINGTON — Federal Reserve Gov. Christopher J. Waller said the central bank may have to raise interest rates if inflation remains stubbornly high, underscoring growing concern among policymakers that price pressures could require a renewed tightening of monetary policy.
According to reporting by The New York Times, Waller said the Federal Open Market Committee could be forced to consider higher rates if upcoming inflation data continue to show underlying price growth running well above the Fed’s 2% target.
Speaking Monday to the New York Association for Business Economics, Waller described monetary policy as being at a “crossroads,” saying recent increases in core inflation have become increasingly difficult to attribute solely to tariffs or higher energy prices tied to the Middle East conflict.
‘A Hot Reading;’
“If we get another hot reading on core inflation this week, then the FOMC will need to consider tightening monetary policy in the near term,” Waller said in prepared remarks released by the Federal Reserve.
Waller said the labor market remains near full employment, allowing the Fed to focus primarily on restoring price stability. He warned against repeating what he characterized as the central bank’s delayed response to inflation in 2021, saying policymakers should not wait too long to act if inflation continues to accelerate.
The comments came a day before the Bureau of Labor Statistics released June consumer price data that showed inflation cooling more than economists had expected, reducing market expectations of an imminent rate increase. Investors subsequently lowered the odds of a July rate hike, although analysts said additional inflation reports will remain critical to the Fed’s policy decisions.
The Federal Reserve’s next policy meeting is scheduled for July 28-29.
