SAN FRANCISCO (Reuters) – Recent data is consistent with the view that the U.S. central bank may be able to bring down inflation without seriously hurting the labor market, U.S. Federal Reserve Governor Christopher Waller said on Friday.
If people do start to believe that prices will continue to rise, beating high inflation may require significant Fed action to shatter those expectations, Waller said in remarks prepared for an academic conference in San Francisco Francisco Fed.
A sharp rate hike by the Federal Reserve could suddenly slow the economy and cause massive job losses.
But if what is driving the price increase is a sudden increase in the frequency with which firms readjust prices — Waller says there is some evidence to support this theory — then “Inflation can be brought down quickly with relatively little pain from rising unemployment,” he said. “Recent data are consistent with this story.”
More data is needed to determine “which story is correct,” he said.
