Federal Reserve Governor Christopher Waller said "we've still got a ways to go" before the central bank stops raising interest rates, despite good news last week on consumer prices.
While officials could moderate the size of their rate hikes to 50 basis points at their next meeting or the one after that — after a string of 75 basis-point moves — Waller cautioned that officials were not close to a pause.
"These rates are going to stay — keep going up — and they're going to stay high for a while until we see this inflation get down closer to our target," Waller said Monday at a UBS Group AG conference in Sydney. "We've still got a ways to go. This isn't ending in the next meeting or two."
The comments echoed remarks this month from Fed Chair Jerome Powell and other colleagues who said rate increases were far from over, but the speed could possibly slow soon.
The dollar advanced as the Fed governor outlined the case for further hikes. Its gains Monday came after a gauge of the greenback slumped more than 1% on Friday and fell for a fourth straight week in its worst performance since 2020.
Waller has been one of the central bank's more hawkish policymakers advocating for tighter policy to cool price pressures.
Data last week showed inflation cooling by more than expected in October, with the consumer price index rising 7.7% from a year earlier versus 8.2% the month before.
That hardened bets by investors that the Fed would raise rates by 50 basis points in December, according to pricing in futures markets, with the benchmark rate peaking around 4.9% in mid-2023.
"It's good finally that we saw some evidence of inflation starting to come down," Waller said. "We're going to need to see a continued run of this kind of behavior on inflation slowly starting to come down before we really start thinking about taking our foot off the brakes here."
The Fed raised interest rates by 75 basis points on Nov. 2 for the fourth straight meeting to a 3.75% to 4% target range and said ongoing increases will be needed as it fights the hottest inflation in 40 years.
Powell told reporters after the decision that recent disappointing data suggests rates will ultimately need to go higher than previously expected, while indicating the central bank could moderate the size of its increases as soon as December.
Officials in September forecast rates would reach 4.4% by the end of this year and 4.6% in 2023 — implying a half-point hike in December and a final quarter-point move next year. They will update their quarterly projections next month.
Asked if rates could rise above 5%, Waller said that would depend on how inflation performed while making plain that the Fed would not shrink from its task.
"7.7% CPI inflation is enormous," he said. "It's really not so much about the pace anymore, it's where we're going end up. And where we end is going to be driven solely by what happens with inflation."
