After having raised key interest rates by 75 basis points at four straight monetary policy meetings, US Federal Reserve Governor Christopher J Waller has given hints that it would consider a small size hike in their upcoming meeting.
Speaking at the 59th Annual Economic Forecast Luncheon, Phoenix, Arizona on Wednesday, Governor Waller said the data of the past few weeks have made him "more comfortable" considering stepping down to a 50-basis-point hike in the upcoming policy meet.
"But I won't be making a judgement about that until I see more data, including the next PCE inflation report and the next jobs report," Waller added.
"If the FOMC were to step down to a 50-basis-point increase, it is important to remember that this would still be a very significant tightening action--in other words, just pulling back on the rate of ascent a little bit." Waller added the federal funds rate can still be increased quite rapidly with several 50-basis-point increases, a pretty aggressive path for policy.
In nine months, US Fed has raised the target range for the federal funds rate from near zero to 3.75 to 4 percent.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
Inflation in the US remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.
"Despite these actions, I believe that policy is barely in restrictive territory today, so more interest rate hikes are needed to get inflation down," Waller said.
The US central bank's aim has been to achieve maximum employment and inflation at the rate of 2 percent over the long run.
Consumer inflation in the US declined in October to 7.7 percent from 8.2 pe cent the previous month but is way above the 2 percent goal.