Fed's Christopher J. Waller is speaking today from Rome, Italy, at a Bank of Italy conference on monetary policy transmission.
He adds:
- Fed policymakers have always been committed to 2% inflation
- Calls 2% inflation a credible pledge.
- Risks have flipped around with labor market stabilizing and inflation taking off, which changes how you think about policy.
- Asked about new Fed Chair Warsh says he is recommitting to inflation target, says that he has never been anything but committed
- If the Fed's reaction function is not well understood, policymakers need to talk about it.
Waller's comment that the Fed chair is recommitting to inflation suggests that the old chair Powell was not committed to inflation. I would take that as more hawkish, but in line with the Fed's decision and comments from Fed's Warsh. Although oil prices are down sharply, and the employment report from last week was softer than expectations, it seems Fed's Waller still wants to see the "whites of eyes" from declining inflation and is not looking to anticipate the declines (at least for now).
More:
- Fed will not keep rates down for the purpose of helping the US government finance its deficit.
- But would prefer the inflation target be set as a range, but changing the target at this point would not be credible
HMMM... The last comment is a bit of a regret to the 2% target.
