Federal Reserve Governor Christopher Waller on Thursday announced that he would be open to the possibility of a half-point interest rate increase at the central bank‘s meeting in March if the upcoming figures suggest inflation is rising, according to a report by the Associated Press.
During a speech at the University of California, Santa Barbara, Waller’s remarks highlight the wide range of views among Fed officials regarding the next steps.
Following Russia’s invasion of Ukraine on Thursday, many economists and investors thought of a half-point rate hike far less likely at the March meeting. However, the invasion’s impact on the U.S. economy “remains to be seen,” Waller said.
The Fed is planning to raise the benchmark short-term interest rate in light of the fact that inflation rose to 7.5% in January over last year. This was the highest increase in over four decades, the report added.
A higher rate usually increases borrowing costs and slows growth and price increases.
Financial markets are closely monitoring the debate on how quickly to increase interest rates. If the Fed increases the rates at a slow pace, inflation will likely remain high and become harder to control. On the other hand, if it increases borrowing rates too quickly, it could trigger a recession.
Certain analysts noted that Fed officials are seeking to keep some flexibility regarding the size of a possible rate increase prior to the March 15-16 meeting. The next report on consumer prices will be released on March 10. Some Fed policymakers prefer to keep a half-point hike if the report indicates that inflation is increasing.
Meanwhile, other Fed officials have been pushing back against a larger hike. Last Friday, New York Fed President John Williams and Fed Governor Lael Brainard supported a number of quarter-point increases that will begin in March.
On Monday, Fed Governor Michelle Bowman announced support for a half-point rate increase in March if the economic data calls for it. Additionally, St. Louis Fed President James Bullard has expressed support for a half-point hike.
Waller said he would like to see the Fed’s benchmark rate raised to a range of 1% to 1.25% by early summer. The current benchmark rate is between zero and 0.25%.
He said this could be achieved by having a quarter-point rise during each of the four Fed meetings. However, if the next employment and inflation reports aren’t showing any signs of the economy cooling, “a strong case can be made” for a 0.5 percentage point rise in March, Waller said.
