A Federal Reserve official is calling for 'several' more rate hikes to combat ballooning inflation

Christopher Waller Fed Governor — Christopher Waller testifies before the Senate in February 2020.
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A Federal Reserve governor pushed for additional 50-basis-point rate hikes in a speech Monday.
Christopher Waller said he supports pushing the government's benchmark rate above a 'neutral level.'
He said aggressive rate hikes will dampen labor demand but have a limited effect on unemployment.

Top Federal Reserve official Christopher Waller expressed support for more aggressive rate hikes from the country's central bank in an effort to tame inflation.

Waller also said he believes further rate hikes won't cause a jump in the US unemployment rate in a Monday speech at the Institute for Monetary and Financial Stability in Frankfurt, Germany.

Waller, a Fed governor, said he's in favor of "several" additional half a percentage point — or 50 basis point — increases in the Federal Reserve's policy rate until he sees "inflation coming down closer to our 2 percent target."

Since January, the Fed has increased its policy rate by 75 basis points, to a target range of between 0.75% and 1%, in the face of mounting inflation.

The last time the Fed raised rates, by half a percentage point in early May, Federal Reserve Chair Jerome Powell also hinted that the central bank would likely pursue 50 basis point rate hikes at its next two meetings in June and July.

In his Monday remarks, Waller also echoed recent comments by Powell that suggest the Fed is prepared to hike rates above its "neutral" level to tamp down inflation — although Powell didn't describe it as an explicit goal of the Fed.

"By the end of this year," Waller said, "I support having the policy rate at a level above neutral so that it is reducing demand for products and labor, bringing it more in line with supply, and thus helping rein in inflation."

The central bank considers the neutral policy rate the point at which monetary policy is neither accommodative or restrictive. While the Fed hasn't offered exact guidance on where that neutral policy rate is, officials have suggested a good proxy is a long-run interest rate of roughly 2.4%.

In Waller's view, the Fed will be able to pursue such aggressive hikes without putting too much of a damper on the unemployment rate, which stood at 3.6% in April.

"The unemployment rate will increase, but only somewhat, because labor demand is still strong — just not as strong — and because when the labor market is very tight, as it is now, vacancies generate relatively few hires," Waller said.

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