Fed Governor Waller Opens the Door to 100 BP Rate Hike at the Next Meeting

The Federal Reserve may need to raise interest rates by a full percentage point at its next meeting, Fed Governor Chris Waller said on Thursday.

In a speech in Idaho, Waller said his 'base case' for the next Federal Open Market Committee meeting was a 75 basis point hike, but he was open to a larger move if economic data warranted it. He pointed in particular to the June retail sales report due on Friday and data on the housing market, which has been a particular concern for the Fed this year. "If that data comes in stronger than expected, it would cause me to lean toward a larger hike at the July meeting to the extent that it shows demand is not slowing fast enough to keep inflation down," Waller said. Waller, one of the most hawkish members of the Fed's Washington-based board of governors, was the first senior Fed official to suggest such a dramatic hike could be on the cards for the meeting, which starts July 26. In his speech, he reiterated his belief that the Fed can tighten policy aggressively without triggering a recession or derailing the labor market, where the unemployment rate is currently 3.6%. "In the first half of 2022, the economy created 2.7 million jobs," he said. "This is not a picture of a weakening job market." The Fed raised the funds target rate by 75 basis points at its last meeting. It was the most extreme monetary tightening action since 1994. Calls for the Fed to do more to contain inflation have grown louder, especially since Wednesday's news that consumer price inflation topped 9% in June for the first time since 1981. The producer prices report for June, released earlier on Thursday, also showed that ex-factory inflation accelerated slightly last month, largely due to higher gasoline and diesel prices.