Fed’s Waller is in favor of a 25 basis point hike at the next meeting

“I am currently in favor of a 25 basis point hike at the next FOMC meeting later this month,” said Waller Friday in remarks prepared to be delivered at the Council on Foreign Relations in New Yorkreferring to the Federal Open Market Committee, entity in charge of setting interest rates. “Beyond that, we still have considerable way to go toward our 2% inflation target, and I look forward to supporting continued monetary policy tightening.”

Waller’s speech was the last scheduled public comment before the US central bank enters a period of silence ahead of its Jan. 31-Feb. 1 policy meeting. Other officials have supported easing the pace of tightening amid signs that inflation is cooling and investors widely expect quarter-point hikes, according to the forecasts of the futures markets.

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“The first task is to sustain the progress we are making in reducing inflation, and restraint in consumer spending will support that progress,” Waller said, noting that he expects declining real incomes and rising borrowing costs to also help bring inflation back “more quickly” to the central bank’s 2% target.

Inflation, by the Federal Reserve’s preferred measure, rose 5.5% in the 12 months to November, down from 6.1% in October, while prices excluding food and energy rose 4.7%, versus 5% of the previous month.

The Fed raised rates by half a point last month, to a 4.25%-4.5% band, following four 75 basis point hikes, after starting near zero in March, in the most aggressive tightening campaign in four decades to cool price pressures.

Waller has been a strong advocate of keeping policy tight and demanding substantial evidence of a cooldown in inflation before easing the tightening campaign. On Friday he was optimistic that the Fed could bring inflation down without seriously hurting the working market nor cause a recession.

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“Six months ago, when inflation was rising and economic output had stagnated, I argued that a soft landing was still possible, that it was quite plausible to push inflation without seriously hurting the labor market.” he pointed. “So far, we have managed to do that, and I remain optimistic that this progress can continue.”

Waller noted that despite economic growth, the job market remains strong. He described this fact as positive, because “it shows that employment and income can withstand the effects of higher interest rates, helping the FOMC to continue its efforts to reduce inflation to our 2% target through further monetary policy tightening.”

The comments of other officials over the past week have shown broad unanimity to continue raising interest rateswith some in favor of a reduction to quarter point increments as you move into restrictive territory.

The meeting is also likely to discuss how much more officials should raise rates given evidence that the economy is slowing in response to rate increases.