Fed's Waller Says Inflation Target Should Be a Range
Federal Reserve Governor Christopher Waller said the central bank should consider setting its inflation goal as a range rather than a fixed 2 percent target, calling the exact figure an overly rigid standard. During a speech Monday, Waller, a voting member of the Federal Open Market Committee, argued that framing the objective as a band would better reflect economic uncertainty, though he cautioned that formally changing the target at this point would undermine the Fed's credibility.
Waller also warned that forward guidance can hinder monetary policy transmission if it becomes too strong or inflexible, particularly when policymakers face diverging economic outcomes. He noted that the risk balance has shifted, with the labor market stabilizing while inflation shows upward pressure, altering the policy outlook. Despite these dynamics, he reaffirmed that policymakers remain firmly committed to the 2 percent inflation pledge and stressed the Fed will not keep interest rates artificially low to help the U.S. government finance its budget deficit.
From the sources (17 posts)
@financialjuiceFed's Waller: Fed policymakers have always been committed to 2% inflation, and it is a credible pledge.
@deitaoneWALLER: RISKS HAVE FLIPPED AROUND; LABOR MARKET SEEMS STABILIZED AND INFLATION HAS BEEN TAKING OFF, WHICH CHANGES HOW YOU THINK ABOUT POLICY
@financialjuiceFed's Waller: The risks have flipped around, the labor market seems stabilized, and inflation has been taking off, which changes how you think about policy.
@firstsquawkFED'S WALLER: FED POLICYMAKERS HAVE ALWAYS BEEN COMMITTED TO INFLATION TARGET, IT IS A ‘CREDIBLE PLEDGE’
@financialjuiceFed's Waller when asked about Warsh recommitting to the inflation target: He has never been anything but committed.
@firstsquawkFed’s Waller: Risks Have Flipped Around - Labor Market Seems Stabilized And Inflation Has Been Taking Off - Changes How You Think About Policy
@firstsquawkWALLER: FORWARD GUIDANCE CAN BE A HINDRANCE IF IT IS 'TOO STRONG OR RIGID' || FORWARD GUIDANCE ALSO 'PROBLEMATIC' WHEN POLICYMAKERS CONFRONT DIFFERENT ECONOMIC OUTCOMES ALL WITH A SIGNIFICANT PROBABILITY OF OCCURRING || WALLER DOES NOT COMM
@zerohedge*WALLER: IN SOME CASES, BEST NOT TO USE FORWARD GUIDANCE AT ALL *WALLER: GUIDANCE PROBLEMATIC WHEN SCENARIOS REQUIRE DIFF. PATHS *WALLER: GUIDANCE CAN HURT POLICY TRANSMISSION IF TOO STRONG
@deitaoneWALLER: FED WILL NOT KEEP RATES DOWN FOR THE PURPOSE OF HELPING THE U.S. GOVERNMENT FINANCE ITS DEFICITS
@financialjuiceFed's Waller: The Fed will not keep rates down for the purpose of helping the US government finance its deficits/
@firstsquawkWALLER: I THINK WARSH WAS RE-AFFIRMING COMMITTMENT TO 2% TARGET
@financialjuiceFed's Waller: It is reasonable to think about a range for the inflation target.
@financialjuiceFed's Waller: I would prefer the inflation target be set as a range, but changing the target at this point would not be credible.
@firstsquawkWALLER: WOULD PREFER THE INFLATION TARGET BE SET AS A RANGE, BUT CHANGING THE TARGET AT THIS POINT WOULD NOT BE CREDIBLE
@financialjuiceFed's Waller: The exact inflation target is too extreme a standard.
@zerohedge*WALLER: CHANGING INFLATION TARGET NOW WOULD NOT BE CREDIBLE *WALLER: EXACT INFLATION TARGET TOO EXTREME OF A STANDARD
@firstsquawkFED’S WALLER: WOULD PREFER INFLATION TARGET BE SET AS A RANGE