Fed's Waller says inflation data consistent with policy

SAN FRANCISCO Reuters -- U.S. Federal Reserve Governor Christopher Waller said on Friday that the data is consistent with the notion that the U.S. central bank may be able to drive down inflation without serious harm to the labor market.

If people really believe that prices are going to keep rising, defeating high inflation could require dramatic actions by the Fed to meet those expectations, Waller said in a speech prepared for an academic conference at the San Francisco Fed.

Dramatic Fed rate hikes could slow the economy and lead to large job losses.

If inflation is brought down quickly with little pain in terms of higher unemployment, Waller said that if what is driving higher prices is a sudden rise in the frequency at which businesses reset their prices. The data is consistent with this story. He said more data will be needed to figure out which story is correct.