Yahoo Finance Fed's Waller says inflation 'still much too high'
Federal Reserve Governor Chris Waller said Friday the Fed hasn't made much progress bringing down inflation based on the latest data while reiterating the view the central bank's job isn't done yet.
"Whether you measure inflation using the CPI or the Fed's preferred measure of personal consumption expenditures, it is still much too high and so my job is not done," Waller said in a speech at the Graybar National Training Conference in San Antonio, Texas.
"Financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further," Waller added.
How much more interest rates need to be raised will depend on incoming data and the extent to which credit conditions tighten.
Waller said he wasn't encouraged much by the latest inflation reading from the Consumer Price Index, noting core inflation did not show much improvement and remains far above the Fed's 2 percent inflation target. "It was the fourth month in a row with core inflation at 0.4 percent or higher," he said.
Data from the BLS out earlier this week showed core inflation as measured by the CPI rose 5.6% over the last year in March.
Waller said stronger growth and job creation than expected has also been a surprise, in his view.
"This growth would mean that, so far, tighter monetary policy and credit conditions are not doing much to restrain aggregate demand," he said.
In March, the US economy added 236,000 jobs while the unemployment rate fell to 3.5%. Over the last six months job gains have averaged 334,000 per month.
When it comes to credit conditions, Waller said it's unclear to what extent stress in the banking system following the failures of Silicon Valley Bank and Signature Bank will dampen economic growth.
"Perhaps even more closely than usual, I will be watching the data to evaluate the appropriate path of monetary policy," he said. "I say this because, all else equal, a significant tightening of credit conditions could obviate the need for some additional monetary policy tightening, but making such a judgement is difficult, especially in real time."
In the past few weeks, Waller said deposit flows have stabilized across banks while usage of the Fed's discount window and lending program has moderated.
Waller called SVB's failure a "classic bank run."
"SVB seems to have done a terrible job managing its risks," Waller said.
The Fed is expected to release a report on the failure of SVB by May 1.
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