Inflation may have peaked in March and there could be some relief on the way, but the U.S. central bank must press ahead with a series of hikes of its benchmark interest rate, said Fed Gov. Christopher Waller on Wednesday.
“I’m forecasting that this is pretty much the peak, it is going to start to come back down,” Waller said, in an interview on CNBC.
Higher market interest rates should start to take a bite out of demand, and oil prices have already retreated after spiking when Russia invaded Ukraine, he noted.
Inflation hit an 8.5% annual rate in March, the fastest pace since 1981. At the same time, core inflation — excluding food and energy — came in softer than expected in March. Because the core rate is seen as a good predictor of future inflation, some economists have started to talk about a peak of inflation.
But other analysts aren’t so sure.
The Fed governor said inflation was too high and the central bank has to continue onward with planned rate hikes to its benchmark interest rate to try to get inflation under control.
Waller repeated he would support a half-percentage-point rate hike at the Fed’s next policy meeting on May 3-4.
Asked if more than one 50-basis-point hikes will be needed, Waller replied: “The data has come in exactly to support that time of policy action if the committee chooses to do so.”
“I have said before I prefer a front-loaded approach. So a 50-basis-point hike in May would be consistent with that, and possibly more in June and July,” he added.
The goal of Fed officials is to get its benchmark policy rate above “neutral” by the later half of this year. The Fed estimates a 2.25% rate for its benchmark would neither boost the economy nor restrain growth. At the moment, the benchmark rate is at an ultra-low range of 0.25%-0.5%.