Federal Reserve Board Director: This round of interest rate hike cycle is definitely endless, and the June meeting may be "wait and see"

**Source: **Financial Association

Edit Zhao Hao

On Wednesday (May 24), local time, Federal Reserve Governor Christopher Waller said that it is possible for the bank to decide to continue raising interest rates or keep interest rates unchanged at the June meeting.

Waller added that even if rates were left unchanged in June, the Fed would still likely need to raise rates later this year. **Because he believes the bank should not end the tightening cycle until there is clear evidence that inflation is cooling.

After the Federal Reserve announced its tenth consecutive interest rate hike earlier this month, this round of tightening cycle has accumulated 500 basis points, which is one of the most aggressive policy paths since the 1980s. Looking ahead to the June 13-14 meeting, the market mostly expects the bank to pause rate hikes, but recent comments from officials have clouded the outlook.

"We need to be flexible on the June decision," Waller said, and officials can give reasons for whether it ends up raising rates, pausing once, or stopping there. As for himself, he is absolutely inclined to support the first two options. **

He expects data on economic conditions and lending activity over the next two months will make it clear that rates need to rise further,** at least beyond the current range of 5% to 5.25%. ** "I do not support a halt to rate hikes unless there is clear evidence that inflation is moving closer to our 2% objective."

As for how to proceed at the June meeting, Waller said whether to raise interest rates or pause once depends in part on the data in the next three weeks. **He added that if the data showed no further signs of cooling economic activity and inflation, a June rate hike would be appropriate.

Based on current readings of economic activity, the Fed has not made much progress in reining in inflation, and Waller pointed to growing concerns that commodity prices won't fall as expected and that a rebound in housing market activity could make the decline in housing costs weaker. than previous estimates.

Waller also mentioned a data here-the annual rate of average hourly earnings, which will appear in the May employment situation report (the "non-farm report"), which is scheduled to be released on June 2. He believes that inflation will only fall significantly if the annual rate of average hourly earnings slows to around 3% from 4.4% in April. **

U.S. Average Hourly Earnings Annual Rate

"In short, I worry that all previous tightening policies have not made progress." In addition to economic data, Waller also said that policymakers should also pay attention to bank financing costs, because three medium-sized banks have failed this year. Significantly increased uncertainty.

"A sudden and unexpected tightening in credit conditions could push the economy down harder than expected," Waller said. **Out of an abundance of caution, I recommend a pause in June.**If credit and banking conditions are in July If the month remains unchanged, then it would be appropriate to continue raising interest rates at the end-July meeting.