Fed Governor Christopher Waller says he's prepared to take rates past 'neutral' to fight inflation

cnbc.com:

Federal Reserve Governor Christopher Waller said Monday he sees interest rate increases continuing through the rest of the year as part of an effort to bring inflation under control.

Specifically, the central bank official said he would support hikes that exceed the «neutral» level considered neither supportive nor restrictive for growth.

Estimates Fed officials provided in March point to a 2.5% neutral level, so that means Waller sees rates increasing at least another 2 percentage points from here.

«Over a longer period, we will learn more about how monetary policy is affecting demand and how supply constraints are evolving,» Waller said in remarks delivered in Frankfurt, Germany. «If the data suggest that inflation is stubbornly high, I am prepared to do more.»

The statements support sentiment reflected in minutes from the rate-setting Federal Open Market Committee meeting held in early May. The meeting summary said officials believe «a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.»

Markets currently are expecting the Fed to raise benchmark borrowing rates to a range between 2.5%-2.75%, in line with a neutral rate. However, if inflation continues to rise, the Fed likely will go even further. The fed funds rate currently is set between 0.75% and 1%.

Minutes also indicated that policymakers see rates rising by 50 basis points at the next several meetings. Waller said he is on board with that position, as the Fed seeks to tame inflation running close to its highest level in more than 40 years.

«In particular, I am not taking 50 basis-point hikes off the table until I see inflation coming down closer to our 2 percent target,» Waller said.