Christopher Waller, Interview: UBS Australasia Conference, Sydney

Transcript not yet available – excerpts from various print publications are below.

Fed Funds

Federal Reserve Governor Christopher Waller said “we’ve still got a ways to go” before the US central bank stops raising interest rates, despite good news last week on consumer prices.

At the same time, policymakers can start considering whether to downshift their speed after four straight hikes of 75 basis points, and the Fed is considering a 50 basis-point hike at the next meeting in December or the one after that, Waller said.

“These rates are going to stay — keep going up — and they’re going to stay high for a while until we see this inflation get down closer to our target,” Waller said Monday at a UBS Group AG conference in Sydney. “We’ve still got a ways to go. This isn’t ending in the next meeting or two.”

“So everybody should just take a deep breath and calm down. We’ve got a ways to go yet.”

“We’re not softening. We’re looking at moving in paces of potentially 50 at the next meeting or the meeting after that,” he said

Inflation

“It’s good finally that we saw some evidence of inflation starting to come down,” Waller said. “We’re going to need to see a continued run of this kind of behavior on inflation slowly starting to come down before we really start thinking about taking our foot off the brakes here.”

“It’s good finally that we saw some evidence of inflation starting to come down, but I just cannot stress, this is one data point,” Waller said.

“We’ve seen a couple of these before where it looked like inflation was turning and it took back off, so we’re going to need to see a continued run of this kind of behavior and inflation slowly starting to come down, before we really start thinking about taking our foot off the brakes here.”

While markets have greeted signs of slowing in US inflation with excitement, Waller emphasized that last week’s US inflation reading of 7.7 per cent was still “enormous”. He said unless there was a “miracle” and inflation fell rapidly, interest rates were going to keep climbing higher.

Waller is a voting member of the Fed’s board of governors, which is chaired by Jerome Powell. Waller stressed that the Fed would want to see further evidence of inflation easing, because “the worst thing you can do” would be to pause interest rate rises, only for inflation to take off again.

“This is kind of what happened to us in 2021. We thought it was going to come down, it was starting to come down, and then it exploded and we were caught flat-footed and we had to pivot very quickly,” Waller said.