(Washington) An official of the American central bank (Fed) indicated Thursday that he would support an increase in the key rate to beyond 5.4% in the coming months, if inflation does not slow further quickly, and the labor market remains tight.
Christopher Waller, who is one of the governors of the monetary institution, distinguishes two scenarios for the next meeting of the Fed, March 21 and 22, and subsequent meetings.
In the optimistic hypothesis, where “job creations fall” and inflation “declines considerably […] and resumes its downward trajectory,” he says he will support two more rate hikes, which could climb as high as 5.1% to 5.4%.
This would be the highest level since 2006. Fed rates are currently in the 4.50-4.75% range.
Two reports will be particularly scrutinized before the next meeting: the unemployment and employment figures for February, which will be published on March 10, and the CPI inflation index, on March 14. The Fed favors another measure to gauge the rise in prices, the PCE index, which will be published on March 31.
Because the Fed wants in particular to reduce the tension on the job market, which is experiencing a major shortage of labour, “which has led to an increase in wages, contributing to high inflation”, detailed the governor.
Inflation, employment, retail sales: the January figures published in February were much higher than expected, while the long-awaited slowdown seemed to be underway before.
“Recent data suggests consumer spending isn’t slowing that much, the labor market continues to be unsustainable, and inflation isn’t falling as fast as I thought it would,” Waller said.
Inflation rose again in January in the United States, to 5.4% over one year, according to the PCE index, favored by the Fed, and which it wants to bring back to around 2%.
And the unemployment rate was at its lowest in more than 50 years, at 3.4%.
Another Fed official, Neel Kashkari, even warned on Wednesday that he was open to a rate hike greater than that of 25 basis points (a quarter of a percentage point) adopted at the previous meeting, the 1er February, and which marked a slowdown after several very strong increases.