Federal Reserve Governor Christopher Waller said that it is time to “hit it” on raising interest rates to deal with inflation that is too high and a labor market, with nearly two open jobs for every job seeker, that is out of whack. Waller told the Economic Club of Minnesota that it is time to raise rates now when the economy can take it. Front-load it, get it done, and then they can judge how the economy is proceeding later, and if they have to do more.
The U.S. central bank raised interest rates by half a percentage point and Fed Chair Jerome Powell signaled similar-sized rate hikes were likely at the next two policy meetings. Waller was asked why, if inflation is as high as it is, the Fed isn’t raising rates even faster. Waller stated that it is not a shock-and-awe Volcker moment, referring to former Fed Chair Paul Volcker, whose battle with inflation in the early 1980s involved sharp and unexpected rate increases of as much as four percentage points at a time.
Back then, Waller said, inflation had been building for years and the public and financial markets had little faith in the Fed’s ability to control it. The current bout of inflation has only been running too high for about a year. Also, he added that they are on it already, and there’s no backing off. And the other advantage is the labor market, which is so strong, the economy is doing so well, this is the time to hit it.