Fed’s Waller Says Inflation Jump Likely Temporary

“The May and June jobs report may reveal that April was an outlier, but we need to see that first before we start thinking about adjusting our policy stance,” Mr. Waller said in a speech. “We also need to see if the unusually high price pressures we saw in the April CPI [consumer-price index] report will persist in the months ahead.”

Since last year, the Fed has held interest rates near zero and purchased $120 billion of bonds each month to support the economy’s recovery from the pandemic-induced recession. Most Fed officials said in March that they expected to leave rates on hold through 2023. Policy makers plan to continue the current rate of bond purchases until the economy makes “substantial further progress.”

Data released Wednesday showed the consumer-price index surged 4.2% in April from a year earlier, prompting market participants to bet that the Fed will start raising rates sooner than officials expect.

Mr. Waller is among Fed officials who say the increase in inflation was likely driven by temporary factors related to the pandemic. While he said inflation will likely exceed 2% this year and next, it should return to the Fed’s target after that.

“The takeaway is that we need to see several more months of data before we get a clear picture of whether we have made substantial progress towards our dual-mandate goals,” Mr. Waller said, referring to the Fed’s objectives of full employment and sustained 2% inflation.

Write to Paul Kiernan at [email protected]