Federal Reserve Governor Christopher Waller pledged on Tuesday that interest rate-setting groups would not make the same mistakes inflation made in the 1970s.
back then He said during a meeting with Minneapolis Fed President Neil Kashkari. The central bank talks hard regarding inflation. But it crumbles whenever tighter monetary policy has led to an increase in unemployment.
This time, Waller said he and his colleagues will act on their intentions to raise interest rates until inflation hits the Fed’s target level. The central abnk has raised rates twice this year. This includes last week’s half-percent point move.
“We know what happened to the Fed that wasn’t serious regarding inflation in the 1970s, and we’re not going to let that happen,” Waller said.
The remarks were accompanied by the fastest spike in inflation in more than 40 years, with President Joe Biden previously calling inflation the economy’s biggest challenge right now. and notice that the battle price increases “Start with the US Federal Reserve”
Although he noted the political independence of the central bank. Biden said “The Fed should do its job. and it will do its job. I believe in that.”
while Waller is comparable to Fed of the 1970s and early ’80s, which eventually defeated inflation with several major interest rate hikes when chairman Paul Volcker took office. He said he doesn’t think current policymakers need to be as aggressive as .
“They have zero credibility, so Volcker basically said, ‘I was shocked and terrified,’” Waller said. “We don’t have that problem right now. This was not the moment Volcker was shocked.”
Volcker’s move brought the Fed’s benchmark interest rate closer to 20 percent and sent the economy into a recession. Waller said he had spoken to the former chairman before his death, and Volcker said, “If I knew what would happen, I would have done it.” Up I will not do that.”
Waller said he thinks the economy can withstand this trajectory of rate hikes, which will be much gentler than the Volcker era.
“The labor market is strong. The economy is doing great,” he said. “This is the time to take action. If you think there will be any negative reaction because the economy can handle it.”
Previously, Thomas Barkin, chairman of the Federal Reserve, Richmond It also supports the goal of controlling inflation. It said a possible path would be to keep the Fed’s interest rates in the 2% to 3% range, and “then we can determine that inflation remains at 2% to 3%.” To the extent that we have to brake on the economy or not?”