(Bloomberg) -- Federal Reserve Governor Christopher Waller said he backs moderating the size of the central bank's rate increase again when officials next gather, while continuing to tighten.
"I currently favor a 25-basis point increase at the FOMC's next meeting at the end of this month," Waller said Friday in remarks prepared for delivery at the Council on Foreign Relations in New York, referring to the rate-setting Federal Open Market Committee. "Beyond that, we still have a considerable way to go toward our 2% inflation goal, and I expect to support continued tightening of monetary policy."
Waller's speech was the last scheduled public comments before the US central bank enters a quiet period ahead of its Jan. 31-Feb. 1 policy meeting. Other officials have supported moderating their pace of tightening amid signs inflation is cooling off and investors widely expect them to move by a quarter point, according to pricing in futures markets.
"Job one is maintaining the progress we are making in lowering inflation, and moderation in consumer spending will support that progress," Waller said, noting that he expects the decline in real incomes and higher borrowing costs to also help return inflation "more promptly" to the central bank's 2% target.
Inflation, by the Fed's preferred measure rose 5.5% for the 12 months through November, a step down from the 6.1% October pace, while prices minus food and energy rose 4.7% versus 5% the previous month.
The Fed raised rates by a half point last month to a target range of 4.25% to 4.5%, following four 75 basis point moves, after starting near zero in March as officials delivered the most aggressive tightening campaign in four decades to cool price pressures.
Waller has been a forceful advocate of maintaining restrictive policy and requiring substantial evidence of cooling inflation before easing up on the tightening campaign. On Friday, he sounded optimistic that the Fed can accomplish disinflation without severe damage to the labor market or a recession.
"Six months ago, when inflation was escalating and economic output had flattened, I argued that a soft landing was still possible—that it was quite plausible to make progress on inflation without seriously damaging the labor market," he said. "So far, we have managed to do so, and I remain optimistic that this progress can continue."
Waller noted that despite economic growth, the labor market remains strong. He called that a positive development, because it "shows that jobs and income can hold up to the effects of higher interest rates, helping the FOMC continue its efforts to lower inflation to our 2% goal by further tightening monetary policy."
Commentary by other officials over the past week showed broad unanimity to continue raising the benchmark lending rate, with some favoring a downshift to quarter-point increases as they push into restrictive territory.
The gathering is also likely to see a debate about how much further officials need to raise rates amid evidence the economy is slowing in response to the rate hikes.
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