Waller sets tone on Tuesday's CPI: Hot inflation will support near-term interest rate hikes.

Federal Reserve Governor Christopher Waller said Monday that the U.S. Federal Reserve may need to raise interest rates in the near term if future data shows inflation remains well above the 2% target, describing current monetary policy as being at a crossroads. Waller noted that the path forward will be determined by new data such as the CPI report to be released Tuesday, adding that if data trends turn unfavorable, the Fed is currently in a phase where it should not slack off. Waller stated: "At the current policy level, inflation still has a chance to gradually fall back to the 2% target. But I am equally concerned about the opposite scenario: data in the coming weeks will show inflation remaining at high levels or even continuing to rise, which would require tighter monetary policy in the near term." He specifically noted that he is concerned recent inflation reports show price pressures appear to be broadening across the economy, beyond the impacts of last year’s import tariff hikes or recent energy cost increases, which may reflect broader systemic inflation and would require tighter monetary policy. Waller added: "If this week’s core inflation rate comes in hot again, the Federal Open Market Committee (FOMC) will have to consider tightening monetary policy in the near term. It will take months of sustained lower inflation data to confirm that inflation is moving in the right direction." (Jinshi)