Starting now, Federal Reserve Governor Christopher Waller<\/strong> said policymakers need to be mindful of the 2021-2022 inflation episode.<\/p>\n \u201cNo matter how you cut it, or what measure you want to use, inflation is up this year<\/strong>,\u201d Waller said in a July 13 speech. \u201cAt this point, I am concerned about the elevated pace of core inflation.\u201d<\/p>\n The U.S. central bank may need to raise interest rates<\/strong> in the near term if upcoming data — including the July 14 Consumer Price Index — continues to run hot, he said.<\/p>\n \u201cI would be very pleased to see a lower reading on core inflation, but after its escalation over the first half of this year<\/strong>, I will need to see several months of lower readings to feel that inflation is moving in the right direction,\u201d Waller said, adding that he would support holding the benchmark Federal Funds Rate steady if that happens.<\/p>\n The Fed, he said, is at a \u201ccrossroads.\u201d<\/p>\n Waller\u2019s speech before the New York Association for Business Economics came one day before Fed Chairman Kevin Warsh was scheduled to give the twice-yearly Monetary Policy Report to Congress.\u00a0<\/p>\n The report, issued July 10, said the outlook of the future path of interest rates \u201cis subject to considerable uncertainty.\u201d<\/strong><\/p>\n The Fed, according to its dual Congressional mandate, has one job to do: use monetary policy to keep prices stable and the labor market at full employment.<\/p>\n That\u2019s tricky.<\/p>\n The rate-setting Federal Open Market Committee voted unanimously last month to hold its benchmark Federal Funds Rate target in a range of 3.5% to 3.75%.\u00a0<\/strong><\/p>\n But the minutes of the June FOMC meeting showed policymakers split on inflation risk and the impact on interest rates.<\/p>\n The CME Group FedWatch Tool is pricing in at least one 25 basis-point hike<\/strong> by year-end in part due to underlying inflation risks.<\/p>\n The funds rate is the interest rate at which banks lend balances at the Federal Reserve to other banks overnight.\u00a0<\/p>\n A change in the funds rate triggers moves in borrowing costs ranging from credit cards to auto loans to even mortgage terms.<\/strong><\/p>\n Policymakers had cut rates by 25 basis points at its last three meetings of 2025 to shore up the softening labor market.\u00a0<\/p>\n These \u201cinsurance\u201d cuts stopped after the majority of policymakers decided the risk from higher prices was outweighing signs that the labor market was stabilizing.\u00a0<\/p>\n Waller was especially vocal beginning in the summer of 2025 about the rising risk in the labor market, which he said appears to have abated.<\/strong><\/p>\n Under then-Chair Jerome Powell, the Fed\u2019s initial delay in raising interest rates during the 2021-2022 inflation surge forced policymakers into 11 aggressive, subsequent hikes to curb soaring pandemic-era prices.<\/strong><\/p>\n The result: a strain on the financial system that heightened recession risks<\/strong> and made the U.S. economy vulnerable to a severe economic crisis.<\/p>\n Related: Fed\u2019s Warsh faces tough interest-rate smackdown in Congress<\/strong><\/p>\n It was the fastest policy-tightening cycle in 40 years<\/strong>.\u00a0<\/p>\n Inflation peaked in June 2022 with headline PCE — the Fed\u2019s preferred inflation gauge — topping out at 7.1%<\/strong> and CPI spiking to a peak of 9.1%.<\/strong><\/p>\n In total, the Fed raised the benchmark Federal Funds Rate by 525 basis points, lifting the target range from 0%-0.25% to a 22-year-high of 5.25%-5.50%<\/strong> to cool consumer demand and restore price stability.<\/p>\n Waller said the U.S. economy is currently in good shape with the labor market appearing stable and consumer demand resilient.<\/p>\n \u201cIf we get another hot reading<\/strong> on core inflation this week, then the FOMC will need to consider tightening monetary policy<\/strong> in the near term,\u201d Waller said.<\/p>\n Consensus puts June headline CPI near 3.8%<\/strong> from a year ago, down from 4.2% <\/strong>in May. Nearly all of the improvement comes from a roughly 10%<\/strong> drop in retail gasoline prices as Persian Gulf supply fears eased in June.\u00a0<\/p>\n Core PCE began rising in January<\/strong> to peak at 3.4%<\/strong> in May. The Fed has missed its 2% <\/strong>inflation target for the last five years.<\/p>\n Persistent increases in underlying inflation could signal that price pressures are spreading through the economy, Waller said.<\/p>\n \u201cThe FOMC has to be ready to tighten monetary policy<\/strong> to prevent a repeat of the 2021-to-2022 inflation episode,\u201d he said.<\/p>\n Bloomberg Economics Chief U.S. Economist Andrew Sacher said it was unrealistic<\/strong> to think the FOMC will move interest rates at its July 28-29 meeting.<\/p>\n Related: Warsh recruits all-star team, AI experts to kickstart Fed reform<\/strong><\/p>\n #Fed039s #Waller #issues #stark #warning #inflation #interest #rates<\/p>\n","protected":false},"excerpt":{"rendered":" Let\u2019s hope the Federal Reserve learned a mighty big lesson from the pandemic-era economic debacle that emerged when the U.S. central bank delayed raising interest rates to tame soaring inflation.… <\/p>\n","protected":false},"author":1,"featured_media":6471,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[246],"tags":[6952,176,125,1238,1455,780,13429,1239],"class_list":["post-12097","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-popular","tag-fed039s","tag-inflation","tag-interest","tag-issues","tag-rates","tag-stark","tag-waller","tag-warning"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/12097","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12097"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/12097\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/6471"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12097"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12097"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12097"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Monetary policy is a tricky balance of prices, jobs<\/strong><\/h2>\n
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![](\"https:\/\/www.thestreet.com\/.image\/NDA6MDAwMDAwMDAzMDcwNjU5\/thestreet_graph_federal-reserve-effective-federal-funds-rate.jpg?profile=rss\")
<\/p>\n<\/figure>\nFed holds interest rates steady thus far this year\u00a0<\/strong><\/h2>\n
Fed cut interest rates in 2025 <\/h2>\n
How the 2021-2022 inflation surge impacted rates<\/strong><\/h2>\n
Waller issues warning, cites past Fed rate-hike delays<\/strong><\/h2>\n