WASHINGTON, Oct 19 Reuters - If inflation keeps rising in coming months rather than subsiding as expected, Federal Reserve policymakers may need to adopt a more aggressive policy response next year, Fed Governor Christopher Waller said on Tuesday.
For now, Waller said in remarks to the Stanford Institute for Economic Policy Research, he continues to believe the economy has seen the worst of the most recent coronavirus wave, that labor and other supply shortages will ease over time and that the escalation of inflation will be transitory, with price increases moving back to the Fed's 2% goal next year.
That would mean any increase to the Fed's key policy interest rate from its current near-zero level is still some time off, he said, a view in synch with most of his colleagues.
The Fed's most recent dot plot depicting policymakers' rate-hike expectations show about half expecting lifting rates by the end of next year, with the other half expecting liftoff by the end of 2023.
A longer wait on raising rates could give the economy more time to achieve full employment, the other leg of the Fed's dual mandate.
But Waller said he feels the risks are shifting and he is now greatly concerned that the current fast rise in prices may continue.