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A Federal Reserve governor has told an Australian investment conference that the world’s most influential central bank is not softening in its battle against inflation, despite recent data sparking hopes it may not raise interest rates as high as feared.
The candid comments from Christopher Waller, a member of the Fed’s board of governors, helped to push the US dollar higher, after sharp declines in the greenback last week.
US Federal Reserve governor Christopher Waller: “Everybody should just take a deep breath and calm down.”Credit:Michael Quelch
Rising US interest rates are having a major influence on global sharemarkets this year, and last week equity prices surged on news that US inflation cooled in annual terms in October, raising hopes that the US Federal Reserve would not raise interest rates as aggressively as expected.
But Waller sought to keep these hopes in check on Monday, telling the UBS Australasia Conference in Sydney that last week’s US consumer price index was “just one data point” and the central bank had “a ways to go” before it would stop raising rates.
“It’s good finally that we saw some evidence of inflation starting to come down, but I just cannot stress, this is one data point,” Waller said.
“We’ve seen a couple of these before where it looked like inflation was turning and it took back off, so we’re going to need to see a continued run of this kind of behaviour and inflation slowly starting to come down, before we really start thinking about taking our foot off the brakes here.”
The US dollar strengthened on the back of Waller’s remarks – a trend that meant the Australian dollar lost some ground against the greenback, slipping from 67.1 US cents to 66.76 US cents on Monday morning.
‘It’s good finally that we saw some evidence of inflation starting to come down, but I just cannot stress, this is one data point.’
Christopher, US Federal Reserve governor
While markets have greeted signs of slowing in US inflation with excitement, Waller emphasised that last week’s US inflation reading of 7.7 per cent was still “enormous”. He said unless there was a “miracle” and inflation fell rapidly, interest rates were going to keep climbing higher.