Fed's Waller does not rule out 2022 rate hike

FILE PHOTO: An eagle tops the U.S. Federal Reserve building’s facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst/File Photo

(Reuters) -Federal Reserve Governor Christopher Waller on Tuesday said he is “very optimistic” about the economy, and while he declined to say when he thinks the Fed should start raising interest rates, he said it could be next year.

“The unemployment rate would have to drop fairly substantially, or inflation would have to really continue at a very high rate, before we would take seriously a rate hike in 2022, but I’m not ruling it out,” Waller told Bloomberg TV in his first public comments since the Fed met earlier this month.

With the crisis phase of the pandemic over, Waller said, “we are now in a different phase of economic policy, and so it’s appropriate to start thinking about pulling back on some of the stimulus,” beginning with how and when to start tapering the Fed’s monthly purchases of $40 billion in mortgage-backed securities and $80 billion in Treasuries.

Waller said he would be “all in favor” of phasing out MBS purchases first.

“Right now the housing markets are on fire; they don’t need any other unnecessary support,” he said. “And it’s an easy sell to the public.”

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