Federal Reserve President Christopher Waller said Thursday that inflation is likely to continue easing and that the central bank could cut interest rates sooner than expected, adding that the Fed's interest rate cuts will be shallower. He made comments that go against recent market movements that he expects to occur.
Waller said on CNBC that inflation is “getting closer to our 2% inflation target,” adding that the Fed's personal consumption expenditure price index, which excludes food and energy costs, is one of the key measures of underlying inflation. The government cited estimates that show it is close to reaching its inflation target. I have met my goal for 6 of the past 8 months.
The next PCE monthly report will not be released until January 31, two days after the end of the Fed's next policy meeting, but analysts expect that monthly core inflation could rise by less than 2% annually. There is.
“If we continue to get numbers like this, it’s reasonable to think we could see a rate cut in the first half of this year…I think this disinflationary trend is here to stay, maybe 2% a little sooner than others. “I'm optimistic that we'll get close to that,” Waller said, adding that a rate cut of three to four quarters of a percentage point could still be possible this year, depending on developments in inflation.
Referring to the Fed's March 18-19 policy meeting, Waller said, “If inflation declines and the labor market remains strong, we could consider resuming rate cuts in the next few months…possible in March.'' I don't think sexuality will be completely eliminated.” . “If we make great progress, you can do more too.”
Waller's somewhat dovish remarks come near the time the Fed is closed to public comment ahead of its Jan. 28-29 meeting, and questions about where the Fed will stand when the next Trump administration takes office. instantly changed market expectations.
The Fed is expected to keep its overnight policy rate steady at a range of 4.25%-4.50% at its meeting later this month, but investors are betting that the pause will likely last until June and that there will be only one rate cut this year. I expected it to be only.
Waller's comments led investors to believe that two rate cuts were likely, with the first rate cut likely as early as May. Bond yields also fell.
“Restrictions remain in place.”
The Fed is trying to reconcile relatively strong economic data with the need for inflation to decline slightly further.
Some analysts, citing strong retail sales and relatively low unemployment, argue that Fed policy is not as restrictive of the economy as expected and could lead to another spike in inflation. I am doing it.
But “we don't see the labor market starting to heat up or accelerate…the situation remains restrictive,” Waller said.
The Fed is also trying to assess how President-elect Donald Trump's policies may affect economic performance in the coming months. Trump begins his second term in the White House on Monday.
Waller expects the impact on prices from higher import duties, for example, to be temporary.
“I don't think tariffs will have a significant or lasting impact on inflation,” Waller said.
