Fed’s Waller says higher interest rates may be needed in 2022 if inflation stays high

October 19, 2021

Fed governor’s remarks lean in hawkish direction

A more aggressive monetary policy might be needed next year if inflation readings stay high, said Federal Reserve Gov. Chris Waller, on Tuesday.

In a speech to Stanford Institute for Economic Policy Research, Waller said his base case remains that this year’s high inflation readings start to moderate.

Still, the Fed governor said he sees “upside pressure on inflation that bears watching.”

The next few months will tell the tale, he added.

“If monthly prints of inflation continue to run high… a more aggressive policy response than just tapering may well be warranted in 2022,” Waller said.

Fed officials will meet in two weeks will decide whether to start to slow down the $120 billion per month of purchases of Treasurys and mortgage-backed securities in mid-November or December.

Waller said he will support starting to slow down the purchases in mid-November.

Tim Duy, chief U.S. economist at SGH Macro Advisors, said comments from the Fed are moving in an overall hawkish direction. He said it will be important to see if Fed Chairman Jerome Powell pushes back on such talk at his upcoming speech on Friday.

Stocks DJIA, 0.55% SPX, 0.40% were higher on Tuesday on the back of strong earning results.

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