Fed Governor Governor Christopher Waller warned in a speech that “the next several months are critical for assessing whether the high inflation numbers we have seen are transitory.” And, “if monthly prints of inflation continue to run high through the remainder of this year, a more aggressive policy response than just tapering may well be warranted in 2022.
He noted, “substantial further progress” towards employment and inflation was already made. He supports ” the FOMC beginning to reduce asset purchases following our meeting in November.” He emphasized that “this action should not tighten financial conditions” since a later 2021 tapering has already been priced in by most market participants. Also, he favored the tapering pace “that would result in the end of asset purchases by the middle of 2022”.
Waller didn’t expect rate hike to occur soon after completing tapering, as “the two policy actions are distinct”. But, if inflation staying “considerably above 2 percent well into 2022”, then he’d “favor liftoff sooner than I now anticipate.”
