Fed’s Waller Wants a Faster Taper With Concern If Inflation Embedded Into Wage Demands

The Federal Reserve is continuing to voice it’s concern about inflation, wages and disparities between those who benefited from asset inflation and those who have been hurt by it. Fed Governor Christopher Waller said on Friday the rapid improving job market market and deteriorating inflation data have pushed him towards favoring a faster pace of tapering and more rapid removal of accommodation.

Fed Gov Waller

“The rapid improvement in the labor market and the deteriorating inflation data have pushed me towards favoring a faster pace of tapering and a more rapid removal of accommodation in 2022, I believe that policy may need to pivot to a faster taper based on incoming data that I will be monitoring.”

Waller said on Friday in New York at an event sponsored by the Center for Financial Stability.

His concerns follow Fed Governor speaking on BBGTV earlier this week said US Core PCE Is “Quite High” and added that the Fed should take towards a more hawkish policy in the next couple of meetings. He said 3%-4% Rate `Is Not My Base Case’ 

The New York Fed president John Williams also was out concerned about inflation, and who is a voting member continued with his hawkish tilt of late. His comments also focused on familiar themes saying supply constraints are a major factor on the labor market and supply chain bottlenecks.

Hawk Fed’s Waller Speech Highlights

At New York event sponsored by the Center for Financial Stability

  • My big concern is if inflation gets embedded into wage demands (wage/price spiral)
  • You are starting to see this and recently signed labor contracts
  • Improvement in labor market, high inflation make me favor faster tapering, more rapid lift off in rates
  • Inflation pressures becoming more widespread, will last longer into 2022 than I expected
  • Labor market is rapidly approaching maximum employment
  • Supply constraints having a larger and more persistent effect on the economy
  • I expect robust GDP growth in Q4 and H1 2022
  • Reducing balance sheet would help smooth market functioning
  • I would support similar process to last time when time comes to start reducing balance sheet

No governor has dissented from a monetary-policy decision since 2005, and board members often position themselves in line with the broader consensus. Shortly after Waller’s remarks, Fed Vice Chair Richard Clarida said at a separate event that it may be appropriate for policy makers to discuss next month whether to speed up the tapering of bond buying.

About Christopher J. Waller

Christopher J. Waller took office as a member of the Board of Governors of the Federal Reserve System on December 18, 2020, to fill an unexpired term ending January 31, 2030.

Prior to his appointment at the Board, Dr. Waller served as executive vice president and director of research at the Federal Reserve Bank of St. Louis since 2009.

In addition to his experience in the Federal Reserve System, Dr. Waller served as a professor and the Gilbert F. Schaefer Chair of Economics at the University of Notre Dame. He was also a research fellow with Notre Dame’s Kellogg Institute for International Studies. From 1998 to 2003, Dr. Waller was a professor and the Carol Martin Gatton Chair of Macroeconomics and Monetary Economics at the University of Kentucky. During that time, he was also a research fellow at the Center for European Integration Studies at the University of Bonn. From 1992 to 1994, he served as the director of graduate studies at Indiana University’s Department of Economics, where he also served as associate professor and an assistant professor.

Dr. Waller received a BS in economics from Bemidji State University and an MA and PhD from Washington State University.

Committee on Federal Reserve Bank Affairs

Governor Brainard, Chair and Oversight Governor for RBOPS
Governor Bowman, Member
Governor Waller, Member

Source: Federal Reserve

From The TradersCommunity US News Desk