Fed Governor Waller supports a quarter-point interest rate hike at the next meeting

Federal Reserve Governor Christopher Waller said Friday that he favors a quarter-percentage-point interest rate hike at the next meeting as he waits for more evidence that inflation is moving in the right direction.

confirms Market expectationsA central bank official said during a Council on Foreign Relations event in New York that the central bank may indicate the size of its rate hikes.

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But he also said it was not time to declare victory over inflation, comparing monetary policy to an airplane that had risen quickly and was now poised to come down.

“According to this logic and based on the data at hand at this time, there appears to be little volatility, so I currently support a 25-basis point increase at the FOMC’s next meeting later this month,” Waller said in prepared notes. “Beyond that, we still have a considerable way to go toward our 2 percent inflation target, and I expect to support continued tightening of monetary policy.”

He did not specify how much he sees rates rising, and is scheduled to participate in a question-and-answer session following the speech at 1 p.m. ET.

Other officials, such as Philadelphia Fed President Patrick Harger, said Jan. 31-Feb. 1 FOMC meeting, but Waller is the highest-ranking member.

While the market and the Fed appear to be on the same page as to where rates are headed in the short term, there is further divergence.

Central bankers have often said they will keep rates high through the end of the year, while markets see a peak in the summer and then a cut shortly thereafter.

Waller said there’s a lot of disagreement about where inflation is going to go.

“The market has a very optimistic view that inflation is going to melt away. There is going to be pure inflation,” he told CNBC’s Steve Leisman during a question-and-answer session after the speech. “We have a different view. Inflation isn’t going to magically melt away. It’s going to be slow and hard to bring inflation down, so we need to keep rates up longer and not start cutting rates before the end of the year. .”

Waller was generally upbeat on the economy, noting that activity slowed in some key areas such as manufacturing, wage growth and consumer spending. He emphasized that the central bank’s goal is not to “stop economic activity” but to bring it back into balance so that inflation begins to fall.

In recent months, inflation gauges such as the consumer price index and the central bank’s preferred personal consumption expenditures price index have reached last summer’s highs. But while the headline CPI fell 0.1%, the index excluding food and energy still rose 0.3%, “still very close to where it was a year ago,” he noted.

“So, while it’s possible to take one month or three months of data and paint a rosy picture, I would caution against doing so,” he said. “When swallowing a story about the future, take the short-term trend with a large grain of salt.”

But Waller said he sees as “soft landing” as possible for the economy, one that would see “improvement in inflation without seriously damaging the labor market.”

“So far, we have done so and I am confident that this progress will continue,” he said.