Federal Reserve Governor Christopher Waller said he could support holding interest rates steady at the next policy meeting if strong labor market conditions persist this month. [AP]
Federal Reserve Governor Christopher Waller said he could support holding interest rates steady at the next policy meeting if strong labor market conditions persist this month. [AP]

Federal Reserve Governor Christopher Waller said the Fed should consider raising its benchmark interest rate again if core inflation continues to run hot — a public warning delivered one day before the US June consumer price index (CPI) release on Tuesday.

Speaking at an event in New York on Monday, Waller said that if this week's core inflation reading comes in elevated again, "the FOMC should consider tightening monetary policy in the near term," according to Bloomberg.

The Labor Department is set to release the June CPI, including the core CPI, on Tuesday. Markets are closely watching how much the recent rise in tariffs and energy prices has fed through into consumer prices.

Waller described the US economy as broadly stable, with the labor market holding firm and consumer spending remaining solid. He identified tariff policy, rising energy prices and growing investment in AI infrastructure as factors that could reignite inflationary pressure.

"No matter how you slice the data, inflation has been moving up this year," he said, pointing to the Fed's preferred gauge — the core personal consumption expenditures (PCE) price index — which rose 3.4 percent in the 12 months through May.

He stopped short, however, of suggesting that additional tightening was imminent.

"I would be very happy if core inflation comes in very low," Waller said, adding that given the upward trend in the first half of this year, the Fed would need to see several more months of low readings before concluding that inflation is heading in the right direction.

He also said that if disinflation resumes, it would be appropriate to maintain the current stance of holding rates steady.

Waller invoked the Fed's widely criticized slow response to inflation in 2021 and 2022, following the COVID-19 pandemic, stressing that "the FOMC should be prepared to tighten monetary policy at any time."


sjy@heraldcorp.com