Waller predicts more rate increases into early 2023.

(Bloomberg) — Christopher Waller,  Governor of the Federal Reserve, stated that despite volatile financial markets, the US central bank must keep raising interest rates through the beginning of 2023.

In prepared remarks delivered on Thursday at the University of Kentucky in Lexington, Waller emphasized that the goal of monetary policy should be to combat inflation. “We should not be looking to monetary policy for this purpose. We have mechanisms in place to address any concerns regarding financial stability.

In an effort to shift to a more restrictive policy stance, US central bankers have increased their benchmark lending rate by 75 basis points at each of their most recent three meetings. As some economic sectors, like the housing market, have slowed due to the substantial increase in borrowing prices, total consumption seems to be holding up well while inflation remains above the central bank’s 2% objective.

“I anticipate additional rate hikes into early next year, and I will be watching the data carefully to decide the appropriate pace of tightening,” he said.

In his remarks, Waller explained how the rent component in inflation measures contributes to inflation remaining high, a tendency that is unlikely to reverse itself anytime soon.

According to Waller, “Shelter inflation is a particularly persistent component of inflation.” Unfortunately, the message is that the cost of housing will probably continue to rise for a while.

While the demand for rental housing is still robust, Waller claimed that increased borrowing rates were slowing down the housing industry. He stated that in order to reduce overall inflation, the cost of commodities and other services would need to moderate.

According to Waller, we are beginning to see some adjustment to excess demand in interest-sensitive sectors like housing, and the monetary policy stance is modestly restrictive. However, more work needs to be done if inflation is to be reduced significantly and continuously.

The September payroll report will be presented to policymakers on Friday. According to a Bloomberg study, unemployment is predicted to remain at 3.7%. Because of this, Waller called accomplishing the twin mandate “a one-sided war.”

He stated, “Monetary policy can and must be employed aggressively to drive down inflation because we now do not confront a tradeoff between our employment target and our inflation objective.”