The Fed’s Waller Reserve Governor Christopher Waller promised Tuesday that interest rate groups would not make the same mistakes on inflation as they did in the 1970s.
He said during a panel with Fed President Neil Kashkari in Minneapolis that the central bank had spoken out. Against inflation but had softened whenever tighter monetary policy triggered a spike in unemployment.
This time, Waller said he and his colleagues would continue their intention of raising interest rates until inflation fell to the Fed’s target.
“We know what happened to the Fed, which didn’t take inflation seriously in the 1970s. And we’re not going to let that happen,” Waller said.
The comments come as inflation is at its hottest pace in more than 40 years. Earlier in the day, President Joe Biden called inflation the biggest challenge facing the economy today. Noting that the fight against inflation “starts with the Federal Reserve.”
Citing the central bank’s political independence, Biden said, “The Fed has to do its job and will do its job. I’m sure of that.”
While Waller draws comparisons with the Fed in the 1970s and early 1980s. Which eventually beat inflation with massive interest rate hikes when President Paul Walker took office, he said he didn’t think policymakers today should be so aggressive.
“They didn’t have any credibility, so Walker said, ‘I just have to do this shock and awe,'” Waller said. “Right now, we don’t have that problem. So it’s not a moment of surprise and admiration for Walker.”
Walker’s move brought the Fed’s interest rate to nearly 20 percent, sending the economy into recession.
Waller said he believes the economy can now keep up with rate hikes, which will be much softer than in the Walker era. “The labor market is strong. “The economy is doing very well. It’s time to come to terms if you think there will be a backlash because the economy can handle it.”
Earlier in the day, Richmond Fed President Thomas Barkin also supported the goal of containing inflation and whether or not to halt the economy.”