"US May Hasten Interest Rate Hikes If High Inflation Persists Until Year-End"

Christopher Waller Fed Board Member "Tapering Should Start from November"

Christopher Waller, Federal Reserve Board (Fed) Governor [Image source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] Christopher Waller, a member of the U.S. Federal Reserve Board (photo), said that tapering (reduction of asset purchases) should begin next month. Waller also stated that a more aggressive response would be necessary if inflation does not stabilize in the short term.

According to Bloomberg on the 19th (local time), Waller said in an online speech at Stanford University's Economic Policy Institute, "There are areas in the employment sector that need further improvement," but added, "However, I believe there has been sufficient progress in the labor market to decide on tapering at next month's monetary policy meeting."

According to the minutes of the September Federal Open Market Committee (FOMC) released last week, Fed officials reached a consensus that tapering should begin in November or mid-December. Waller placed more weight on November than December.

Regarding inflation, which has already exceeded the Fed's monetary policy target of 2%, Waller expressed expectations that it will calm down and said there is still time before the need to raise the benchmark interest rate.

However, he noted that the risk of inflation remaining at a high level still exists, stating, "If monthly inflation figures remain high for the rest of this year, a more aggressive policy response than tapering could be justified in 2022." The phrase "a more aggressive policy response than tapering" refers to raising the benchmark interest rate.

Specifically, Waller said, "If inflation significantly exceeds the 2% monetary policy target next year, I think it would be better to bring forward the timing of the benchmark interest rate hike compared to my current expectations." He did not disclose when he expects the rate hike to occur.

He also said, "If the inflation rate remains at 5% next year, monetary policy officials will likely bring forward the timing of the rate hike on the dot plot," adding, "In this case, there is a possibility of more than one rate hike next year."

The U.S. consumer price inflation rate has recorded over 5% for five consecutive months recently. The September inflation rate was 5.4%. Inflationary pressures are increasing further due to recent rises in oil and raw material prices.

In fact, Procter & Gamble (P&G), a major U.S. household goods manufacturer, announced on the same day that it will raise prices on key products. P&G explained that due to increases in raw material prices and transportation costs, the expected expenses for this fiscal year, initially estimated at $1.9 billion, are expected to rise to $2.1 billion. P&G also revised upward its forecast for raw material and transportation costs for this fiscal year ending in June next year, indicating that the inflationary trend will continue.

This content was produced with the assistance of AI translation services.