U.S. Federal Reserve President Christopher Waller responded to the central bank's forecast for rising prices and growing expectations among investors that the Fed may not cut rates significantly this year. , showed a redoubled stance on further interest rate cuts and curbing inflation.
“We believe that inflation will continue to move toward our 2% target over the medium term and continue to do so.” [interest rate] The cuts would be appropriate,” he said at an event in Paris for the Organization for Economic Co-operation and Development (OECD), a policy group representing rich countries.
Waller noted that the six-month core personal consumption expenditure (PCE) price index has been steadily adjusting to prices, falling to an annual rate of 2.4% in November and continuing to decline over the past year. There is.
He also dismissed concerns that the incoming Trump administration's expected tariffs would accelerate inflation, saying they likely would not have a “significant or lasting impact” and that his views on policy He said it was unlikely to have any impact. During the first Trump administration, tariffs did not cause rapid inflation.
Waller's confidence that prices will fall is a counterpoint to the Fed's sharp upward revision to this year's inflation path in December. Markets were spooked after the Federal Reserve raised its 2025 inflation forecast to 2.5% from 2.1%. The bank also predicted a decline in unemployment and an increase in gross domestic product (GDP), while halving the number of quarter-point rate cuts it had expected.
The forecast came as a surprise after the Fed cut rates by a decisive half-point in September, sending a message suggesting post-pandemic inflation was largely contained.
Waller noted that worker productivity has increased across the U.S. economy in the wake of the pandemic, and that workers may be responsible for more than half of total U.S. GDP growth since 2019. He said there is. He said improved productivity levels could lead to an increase in the U.S. neutral interest rate. In the long run.
Reasons for the productivity increase include better worker-employer matching due to increased turnover during the pandemic, increased worker training due to labor shortages, increased remote work, and increased business creation. .
In his speech, Waller also pointed to a number of risks facing the global economy, including war in Central Europe, an aging demographic, and growing skepticism about globalization.
