Federal Reserve Governor Christopher Waller said Friday the central bank should remove its easing bias from policy statements, though he stopped short of advocating for an interest rate increase at this time.
Speaking at an economic forum in Frankfurt, Germany, Waller said the Fed needs to maintain its current policy rate until inflation shows clear signs of returning to the central bank's 2% target. The Fed's preferred inflation measure hit 3.8% in April.
"Inflation is not headed in the right direction," Waller said in prepared remarks. "I would support removing the 'easing bias' language in our policy statement to make it clear that a rate cut is no more likely in the future than a rate increase."
Waller, who previously supported lower interest rates, expressed concern about inflation becoming more persistent and spreading across goods and services. He said the next policy move, whether a rate increase or cut, will depend on incoming economic data.
"The next move, whether it is a hike or cut, will depend on the data," Waller said. "Removing the language about the extent and timing of additional adjustments would make this point clear."
The Fed governor said he does not expect to support a policy rate change in the near term, adding that the outcome will depend heavily on the length of the Iran conflict. He noted the labor market is balanced and no longer the primary concern in determining policy direction.
Waller said he is concerned about rising inflation expectations as the Fed's inflation target miss enters its sixth year. He warned that if expectations become unanchored, he would not hesitate to support a rate hike.
The governor noted that high energy costs have not reduced consumer spending and said there is no sign the artificial intelligence investment boom will slow.
Incoming Fed Chair Kevin Warsh faces pressure to adopt a more hawkish policy stance at the June meeting.
