Federal Reserve Chair Wash: “Zero tolerance” for persistent high inflation; if necessary, will discuss using interest rate tools

BlockBeats message: On July 15, Federal Reserve Chair Waller said at the congressional hearing for the first time that the Fed has “zero tolerance” for persistently high inflation. The fact that inflation has been above the 2% target for the past five years is a dereliction of duty by the Fed, and the Fed will not change its judgment due to an improvement in CPI data for a single month.

Regarding monetary policy, Waller said that interest-rate tools are still among the policy options. In the future, he will discuss with the Federal Open Market Committee (FOMC) when and to what extent to use the relevant tools to tackle inflation, but he did not provide any forward-looking guidance on the future path of interest rates. The market believes this is the first time since he returned to the Fed in May this year that he publicly acknowledged that monetary policy may need to be tightened when necessary.

In addition, Waller emphasized that the Fed will maintain independence when setting interest-rate policy, unaffected by political factors. He also said it has launched multiple reform working groups to drive adjustments for the Fed in areas such as economic analysis, policy formulation, and communication mechanisms, ushering in a “new chapter” for the Fed.