Federal Reserve Board of Governors member Christopher Waller hinted that the central bank may begin tapering its aggressive quantitative easing.
As The Daily Wire reported, the Federal Reserve has repeatedly decided that it would not amend its near-zero interest rate target and $120 billion monthly bond purchases — both of which are meant to increase the money supply in order to encourage economic activity — despite an inflation rate that has risen throughout much of 2021.
In an interview with CNBC’s “Squawk Box,” however, Waller — one of the seven economists in charge of managing American monetary policy — implied that the stimulus has attained its objective of promoting recovery after COVID-19 and the lockdown-induced recession.
“In my opinion, that’s substantial progress and I think you could be ready to do an announcement in September,” he explained, adding that if the next two jobs reports “come in as strong as the last one, then I think you’ve made the progress you need.” If they do not, “then you’re probably going to have to push things back a couple months.”
Waller noted that the Fed ought to raise rates in case additional monetary stimulus is necessary next year.
“In my view, with tapering we should go early and go fast in order to make sure we’re in position to raise rates in 2022 if we have to,” he said. “I’m not saying we would, but if we wanted to, we need to have some policy space by the end of the year.”
Though Waller believes that inflation is largely driven by enduring COVID-era supply shortages, he is worried that inflation will remain high since businesses have been able to retain their margins by passing costs on to consumers.
“My concern is just anecdotal evidence I’m hearing from business contacts, who are saying they’re able to pass prices through. They fully intend to. They’ve got pricing power for the first time in a decade,” he explained. “Those are the sorts of issues that make you concerned that this may not be transitory.”
In contrast, President Biden brushed off worries about long-lasting inflation in a recent speech and emphasized its purported transitory nature:
We also know that as our economy has come roaring back, we’ve seen some price increases. Some folks have raised worries that this could be a sign of persistent inflation. But that’s not our view. Our experts believe and the data shows that most of the price increases we’ve seen are — were expected and expected to be temporary.
Now, I want to be clear: My administration understands that if we were to ever experience unchecked inflation over the long term that would pose real challenges to our economy. So while we’re confident that isn’t what we are seeing today, we’re going to remain vigilant about any response that is needed.