U.S. Federal Reserve Governor Christopher Waller stated on Friday that recent data suggests the U.S. central bank may be able to control inflation without harming the labor market. In remarks prepared for an academic conference at the San Francisco Fed, Waller also mentioned that if people continue to expect prices to rise, the Fed may have to take drastic measures to counter these expectations.
Recent inflation figures have caused concern among policymakers and the public alike. The Fed has responded by maintaining a policy of near-zero interest rates and asset purchases of $120 billion per month. Some critics have argued that the Fed’s response could fuel inflation further.
However, Waller’s comments suggest that the central bank’s efforts to control inflation may not lead to significant harm to the labor market. Waller pointed to recent data indicating that inflation is likely to be transitory and that there is no need for the Fed to take drastic measures to curb it.
Waller emphasized that the Fed should not react too aggressively to inflation concerns, as this could have negative effects on the labor market. Instead, he suggested that the Fed should wait and see how inflation evolves over time before taking any action.
If people start to believe that inflation will continue to rise, Waller noted that the Fed may have to take more drastic measures to puncture these expectations. He also cautioned that the Fed must carefully balance its inflation-fighting efforts with its commitment to maintaining full employment.
In conclusion, Waller’s remarks suggest that recent data on inflation indicates that the Fed may be able to control it without causing significant harm to the labor market. However, the Fed must continue to monitor inflation and make adjustments to its policies as necessary to maintain price stability and full employment.