"Depends on Data" Fed's Waller Leaves Door Open for 1.0%P Rate Hike

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Christopher Waller, a member of the Federal Reserve Board (Fed), stated on the 14th (local time) that he supports a 'giant step' of raising the benchmark interest rate by 0.75 percentage points at the July Federal Open Market Committee (FOMC) regular meeting. However, he also left open the possibility of a 1.0 percentage point increase depending on the data.

According to the economic media CNBC, Waller attended an event held in Idaho on the same day and said, "My stance on the July (rate hike) depends on the data" regarding the next meeting.

He explained, "I support another 0.75 percentage point increase," but added, "There will be important data releases on retail sales, housing, and more before the July meeting, and if this data comes out stronger than expected, I will lean toward a larger increase." He explained that such strong data indicates that demand is not slowing down fast enough to reduce inflation.

The U.S. Department of Labor released the June Consumer Price Index (CPI) inflation rate the day before, recording 9.1%, the highest level since 1981. As inflation far exceeded market expectations, forecasts predict that the central bank, the Fed, will accelerate its tightening measures. The June Producer Price Index (PPI) released on the same day also rose 11.3% year-on-year, marking the highest level in three months. Producer prices are considered one of the key indicators that investors watch because they carry the risk of being passed on to consumer prices.

Waller emphasized, "To lower inflation, we must act swiftly and decisively." However, he expressed an optimistic view of the U.S. economy. Regarding growing concerns about a recession surrounding the U.S. economy, he assessed, "We did not enter a recession in the first half of 2022, and economic expansion will continue." He also mentioned that it is possible to achieve a so-called 'soft landing' that avoids a recession despite the Fed's tightening measures.

Meanwhile, the Atlanta Federal Reserve Bank’s GDPNow, which compiles real-time data, estimated on the 8th that the U.S. second-quarter gross domestic product (GDP) growth rate will be -1.2% annualized. This is a warning that a 'technical recession,' defined as two consecutive quarters of negative growth, could become a reality.