(Bloomberg) -- Federal Reserve Governor Christopher Waller said the US central bank needs to continue to raise interest rates into early 2023 and keep the battle over inflation a top priority despite roiled financial markets.
“The focus of monetary policy needs to be fighting inflation,” Waller said in prepared remarks Thursday at the University of Kentucky in Lexington. “We have tools in place to address any financial stability concerns and should not be looking to monetary policy for this purpose.”
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US central bankers have raised their benchmark lending rate by 75 basis points at each of their last three meetings to try to move to a restrictive policy stance. The sharp rise in borrowing costs has slowed some sectors of the economy, such as housing, but overall consumption appears resilient while inflation persists well above the central bank’s 2% target.
“I anticipate additional rate hikes into early next year, and I will be watching the data carefully to decide the appropriate pace of tightening,” he said.
Waller’s remarks detailed how the rent component in inflation measures is helping keep inflation high, a trend that is unlikely to change soon.
“Shelter inflation is a particularly persistent component of inflation,” Waller said. “Unfortunately, the message is that shelter inflation will likely remain high for several months.”
Waller said that higher interest rates were slowing housing activity, while demand for rental housing remains strong. He noted that the prices of goods and other services would have to moderate to lower overall inflation.
“The stance of monetary policy is slightly restrictive, and we are starting to see some adjustment to excess demand in interest-sensitive sectors like housing,” Waller said. “But more needs to be done to bring inflation down meaningfully and persistently.”
Policy makers will see the payroll report for September on Friday. With unemployment expected to be unchanged at 3.7%, according to a Bloomberg survey, Waller said achieving the dual mandate was “a one-sided battle.”
“We currently do not face a tradeoff between our employment objective and our inflation objective, so monetary policy can and must be used aggressively to bring down inflation,” he said.
©2022 Bloomberg L.P.
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