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The U.S. Federal Reserve should raise its key interest rate a half-point when it meets this month, Christopher Waller, a U.S. Federal Reserve Bank governor, said in a 24 February speech at the University of California Santa Barbara.
“We constantly say we have the tools to fight inflation,” he said, referring to the Fed’s policy officials, “and now we must demonstrate the will to use them.”
The Core Personal Consumption Expenditures Price Index, the Fed’s preferred measure of inflation’s pace, gained another 0.5 percent in January after adding the same amount in December (see related story in this issue).
Waller said he would like to see the Fed’s rate one full point higher by July.
Most Fed officials support raising rates at this month’s meeting but have voiced support for a quarter-point hike, not a half-point. Russia’s invasion of Ukraine has heightened speculation that the Fed will be more reserved in any policy shift made in the short term (see related story in this issue).
The Ukraine war and its effect on commodity prices might mean “that a more modest tightening is appropriate,” Waller added, “but that remains to be seen. Should the data break against us in the coming weeks, we need to be prepared to hike the policy rate by” a half-point.
Waller’s call for a half-point hike echoes that of James Bullard, president of the Federal Bank of St, Louis, who suggested last month that the Fed could consider a half-point raise in March and also could raise rates between its scheduled bimonthly meetings, as we reported in “Interest Rate Hikes Coming, the Worst is Yet to Come” (15 Feb 2022).
TREND FORECAST: Again, as we have greatly detailed throughout this Trends Journal, the Ukraine War has derailed the Fed rate raising strategy. The Fed, being cautious to a fault as well as late to act, will most likely raise interest rates by only a quarter-point when it meets mid-month. Should they raise them 50 basis points, it will put strong downward pressure on equities and both residential and commercial real estate.
However, as Gregory Mannarino notes in his article “The Latest Plague And The Crisis to Crisis Mechanism,” the money pumping schemes will continue since “Every manner of other ‘crisis’ will subsequently be used to keep the flow of debt being borrowed into existence growing, it cannot stop.”
And on the war front, the hard fact is; no one anywhere on the planet knows how the Ukraine War will play out. Should it wind down and Russia take control and military operations dramatically decrease, most of the world will go on with life without much care.
Should the war continue to escalate and Russia, a NATO nation or the U.S. be attacked in any significant manner…be it militarily, cyber war, etc., it will be the official beginning of WWIII.