Fed's Waller: "Several more months" of data needed before debating policy shifts

  • 5/13/2021
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WASHINGTON, May 13 (Reuters) - The U.S. Federal Reserve needs “several more months of data” before considering changes to its wide-open monetary policy, to ensure that recent weak job growth and high inflation prove temporary, Federal Reserve Gov. Christopher Waller said on Thursday. Waller said a “ready to rip” economy will eventually work through what he regards as a temporary “mismatch” between companies’ booming demand for workers and the willingness of people on the sidelines to take jobs while the pandemic is ongoing and unemployment benefits are available to pay the bills. April’s higher than expected 4.2% annual jump in consumer prices, meanwhile, will prove temporary as supply bottlenecks ease, and consumers spend down a surplus of savings accumulated from the flow of government funds during the pandemic, Waller said. “The U.S. economy is hitting the gas and continuing to make a very strong recovery,” Waller said. Still, the April inflation and job results were a surprise that led to “the jaw of every forecaster hitting the floor,” Waller said, and confirmed the need for the Fed to base changes to its policies on outcomes, not forecasts that particularly coming out of a pandemic might be off base. The Fed has said it would not change its $120 billion in monthly bond purchases until there has been “substantial further progress” in putting people back to work, with an increase in the current near-zero target interest rate even further down the road. It also wants to nudge inflation above 2% for some time to make up for prior weak inflation, and has pledged not to overreact to short-term jumps in prices that may now be underway. The May and June job reports “may reveal that April was an outlier, but we need to see that first before we start thinking about adjusting our policy stance,” Waller said. “Now is the time we need to be patient, steely-eyed central bankers, and not be head-faked by temporary data surprises.” (Reporting by Howard Schneider Editing by Chizu Nomiyama) Our Standards: The Thomson Reuters Trust Principles.

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