WASHINGTON: Federal Reserve (Fed) governor Christopher Waller says the United States economy can handle aggressive policy tightening, as he reiterates support for raising interest rates by a half point next month.

       “I prefer a front-loading approach. So a 50-basis point (bps) hike in May would be consistent with that and possibly more in June and July,” Waller said in an interview with CNBC Television.

       “We want to get above neutral certainly by the later half of this year and we need to get closer to neutral as soon as possible.”

       The neutral rate – a theoretical level that neither speeds up nor slows down the economy – lies around 2.4%, according to the latest median Fed estimate.

       Officials increased interest rates by a quarter point in March to a target range of 0.25% to 0.5% and signalled they expect to keep hiking all year, while starting to shrink their bloated balance sheet next month.

       Waller said that it was “completely feasible” the Fed could slow demand without triggering a recession because the economy was so strong.

       “This is a good time to do a kind of aggressive action because the economy can take it,” Waller said.

       Since then, officials have said this tightening cycle will be faster than in previous economic recoveries – including by raising rates in larger 50-bps steps if necessary – to curb surging inflation. Waller said there was no need to shock financial markets, however.

       “I don’t see any value in trying to shock the markets; we are not in a Volcker kind of moment,” he said, referring to former chair Paul Volcker who battled double-digit inflation in the late 1970s and early 1980s that had become entrenched.

       “If inflation doesn’t cool off, we will keep going,” he said. “We will do what it takes to get inflation back down, but we can do that in an orderly way without causing a lot of financial-market stress.”

       The consumer price index (CPI) rose 8.5% from a year earlier in March, the most since 1981, with Russia’s invasion of Ukraine pushing up prices for food and energy.

       Waller said the March CPI report marked a peak in price pressures, and his own forecast calls for deceleration in the second half of the year. Officials think that one or more half-point increases “could be appropriate” if inflation remained elevated. — Bloomberg