Fed Governor Christopher Waller warns THIRD consecutive .75% interest rate is imminent

The governor of the Federal Reserve said he’s in favor of another ‘significant’ increase in interest rates for a third consecutive month, in a move that will further spike mortgage repayments for inflation-battered Americans. 

Christopher Waller backed the central bank in making what’s known as a 75 basis-point move, or a .75 percent increase, during a speech in Austria on Friday, according to Bloomberg. 

Waller, while noting inflation was still ‘far too high’, said: ‘I support a significant increase at our next meeting on September 20 and 21 to get the policy rate to a setting that is clearly restricting demand.’

His speech likely means interest rates will increase yet again after the monthly inflation report for August 2022 is published on Tuesday.

It sat at 8.5 per cent in July, slightly down from the record of 9.1 per cent it hit the year before, but still sitting at a figure last seen in the early 1980s.  

Waller’s comments mean the Fed remains committed to slowing down some of the highest inflation levels in American history. 

It does so by increasing the base interest rate, which is then adjusted for all loans and borrowing taken out by Americans.

Anyone not on fixed-rate repayments must pay back more, with the move aimed at stifling demand in the hopes of cooling the economy.  

Christopher Waller backed the central bank making what’s known as a 75 basis-point move, or a .75 percent increase, during a speech in Austria on Friday, according to Bloomberg

Fed Chair Jerome Powell had already kept the option open for the increase, which is supported by many bankers in a desperate attempt to control inflation.  

Bloomberg surveyed a group of economists who suggested that the rise in August would come in at about 8.1 percent vs. 8.5 percent in July. This is credited to lower gas prices. 

Waller is still concerned, however: ‘While I welcome promising news about inflation, I don’t yet see convincing evidence that it is moving meaningfully and persistently down along a trajectory to reach our two percent target.’

He said that the Fed will continue to take ‘significant steps’ to control policy and added that rate hikes may continue into early 2023.   

This came after the number of open jobs in the United States rose in July after three months of declines, a sign that employers are still urgently seeking workers despite a weakening economy and high inflation.

Waller backed the central bank making what’s known as a 75 basis-point move, or a .75 percent increase, during a speech in Austria on Friday, according to Bloomberg

There were 11.2million open jobs available on the last day of July – nearly two jobs, on average, for every unemployed person – up from 11million in June. June’s figure was also revised sharply higher. 

The increase that the government reported Tuesday will be a disappointment for Federal Reserve officials, who are seeking to cool hiring and the economy by raising short-term interest rates to try to slow borrowing and spending, which tend to fuel inflation. 

Fed officials hope that their policies will serve primarily to reduce job openings and spare workers the pain of widespread layoffs and higher unemployment.

‘The Fed has made very little progress in terms of narrowing the gap between labor supply and demand,’ Aneta Markowska, chief economist at investment bank Jefferies, wrote in a research note.

There were 11.2 million open jobs available on the last day of July – nearly two jobs, on average, for every unemployed person – up from 11 million in June. June’s figure was also revised sharply higher

Fed officials hope that their policies will serve primarily to reduce job openings and spare workers the pain of widespread layoffs and higher unemployment

Reducing the high demand for workers to a level closer to the available supply would ease the pressure on companies to pay higher wages to attract and keep workers. 

Higher pay has been passed on by many businesses to consumers in the form of higher prices, thereby intensifying inflation.

Last month, job openings rose in retail, warehousing and shipping, professional services, and in state and local education. Openings declined in manufacturing and health care.