Fed official says rate rise should be considered if inflation stays high

US Federal Reserve governor Christopher Waller said the central bank should be ready to raise interest rates soon if inflation continues to run above its target.

Speaking in Rome, Waller said that when inflation is far above target and the labor market is near full employment and stable, serious policy rules point toward raising the policy rate to reduce inflation. He said the next consumer price index report, due Tuesday, would be important. If core inflation is again high, he said, the Fed would need to consider tightening monetary policy in the near term.

Waller cited the 12-month personal consumption expenditures inflation rate, which stood at 3.4 percent in May. That is above the Fed's 2 percent target. He said the Fed has to be prepared to tighten policy to avoid a repeat of the 2021-to-2022 inflation episode.

AFP reported that Waller's position is in line with comments from newly installed Fed Chair Kevin Warsh, who said at his first press conference as chair that the central bank would achieve price stability. Waller said he recognised the need to avoid excessive tightening that could risk a recession, but said that unless he sees evidence of a significantly weaker labor market, his focus will remain on inflation.