Federal Reserve Board Governor Christopher Waller during a Fed Listening event in Washington, DC, Friday, September 23, 2022.
Al Drago | Bloomberg | Getty Images
Federal Reserve Governor Christopher Waller said on Thursday that he would need to see more evidence that inflation is cooling before being willing to support a rate cut.
The policy speech in Minneapolis ended with a question: “What’s the rush?” Regarding rate cuts, central bank officials said higher-than-expected inflation data in January raised questions about where prices are heading and what the Fed should do. Coping with questions.
“Last week’s high CPI inflation reading may be just a bump in the road, but it may also be a warning that the remarkable gains in inflation over the past year may be stalling,” Waller said in prepared remarks. . ”
Waller said that while he still expects the Federal Open Market Committee to begin cutting interest rates at some point this year, he sees “primarily upside risks” to the expectation that inflation will drop to the Fed’s 2% target.
He added that with gross domestic product and employment growing at an annualized rate of 3.3%, there are few signs that inflation will fall below 2% anytime soon, and few signs of a potential recession. Waller is a permanent voting member of the Federal Open Market Committee (FOMC).
“That makes the decision to be patient when starting to ease policy easier than it actually is,” Waller said. “I’d need to see at least a few more months of inflation data before I can tell whether January is a speed bump or a pothole. “
The comments were consistent with the central bank’s general sentiment that while further interest rate hikes were unlikely, the timing and pace of rate cuts was uncertain.
Inflation data cited by Waller showed that the consumer price index rose 0.3% in January, an annual increase of 3.1%, both higher than expected. Excluding food and energy, core CPI rose 3.9% annually and 0.4% this month.
After reading the data, Waller said the core personal consumption expenditures price, the Fed’s preferred inflation measure, to be released later this month will likely reflect the 2.8% 12-month gain.
He said such a high reading made the case for waiting even stronger, noting that he would focus on consumer spending, jobs and wages and payroll data for further clues on inflation. Retail sales unexpectedly fell 0.8% in January, while employment surged by 353,000 that month, much higher than expected.
“I still expect it will be appropriate to begin easing monetary policy at some point this year, but the onset of policy easing and the number of rate cuts will depend on incoming data,” Waller said. “The upshot is that I believe the committee can wait a little longer to ease. Monetary Policy.”
Just weeks ago, the market had priced in the possibility of a rate cut when the Fed next meets on March 19-20, according to federal funds futures bets calculated by CME Group. However, that scenario has been reduced to the June meeting, with the likelihood that the Federal Open Market Committee (FOMC) may even wait until July rising to about one-third.
Earlier in the day, Fed Vice Chairman Philip Jefferson was noncommittal on the pace of rate cuts, saying only that he expected to ease policy “later this year” but did not provide a timetable.
Governor Lisa Cook also spoke and noted progress in the Fed’s efforts to lower inflation without weighing on the economy.
However, Cook said that while she also expected a rate cut this year, she “wanted to have greater confidence that inflation could return to 2% sustainably” before taking action.
