(Frankfurt am Main) An official of the American Federal Reserve (Fed) anticipates several increases in key rates by half a point between now and the end of the year, and “until inflation has returned close of our 2% target,” believing this to be possible without driving up unemployment.
Posted at 12:01
“I am in favor of a tightening of an additional 50 basis points (half a percentage point, editor’s note) during several meetings,” said Christophe Waller, one of the Fed governors, in a speech on Monday. virtual in front of Goethe University in Frankfurt, Germany.
The Fed usually raises interest rates in quarter-percentage-point increments, but in early May resorted to a sharp half-point hike, for the first time since 2000, to stem the record inflation.
“I won’t take the 50 basis point hikes off the table until I see inflation getting closer to our 2% target,” he said.
Rates, which are in a range of 0.75 to 1.00%, should, according to him, be raised by the end of the year until they exceed the so-called “neutral” level, considered to be between 2.00 and 3.00% approximately.
He thus said he was on the same line as market expectations, citing rates up 2.5 points in total over the year, going from the range of 0 to 0.25% in which they were up until in March, at 2.5-2.75%.
“If we have to do more, we will,” he said.
Such a movement should make it possible to reduce “the demand for products and labour, (align it) more with supply and (help) thus to control inflation”, he underlined.
Mr. Waller also considered that the “soft landing” promised by the chairman of the Fed, Jerome Powell, was possible: “I remain optimistic that the solid labor market can support higher (key) rates high without a significant increase in unemployment.
And, as fears grow of the US economy sliding into recession, after gross domestic product fell in the 1er quarter, he was also reassuring.
This contraction “was due to fluctuations in two volatile categories, inventories and net exports, and I do not expect them to recur”.
The Fed favors the PCE index, which showed inflation of 6.3% over one year in April, lower than the 6.6% in March. Over one month, the slowdown is even more marked, at 0.2% against 0.9%.