Federal Reserve Board Governor Christopher Waller delivers a speech at the annual meeting of the Clearing House in New York City on November 12, 2024.
Brendan McDermid | Reuters
Federal Reserve Governor Christopher Waller said on Monday that he expects to cut interest rates in December but is concerned that recent inflation trends could change his mind.
“Based on the economic data available today and forecasts that inflation will continue to fall to 2% over the medium term, I am currently inclined to support a reduction in policy rates at the December meeting,” Waller said at the December meeting. In Washington Money Speech delivered at policy forum.
However, he noted that “that decision will depend on whether the data we receive before then surprises higher and changes my forecast for the path of inflation.”
Waller cited recent data suggesting progress on inflation may be “stagnant.”
In October, the Fed’s preferred inflation indicator personal consumption expenditures price indexshowed headline inflation rising to 2.3% annually and core prices (excluding food and energy costs) rising to 2.8%. The Fed’s target interest rate is 2%.
While the data was in line with Wall Street expectations, it was an increase from the previous month and evidence that despite progress, the central bank’s goals remain elusive.
“Overall, I feel like an MMA fighter constantly suffocating the bloat and waiting for it to go away, only for it to slip out of my grasp at the last moment,” Waller said of MMA. Said during the fight. “But I assure you, capitulation is inevitable – inflation is not going out of the octagon.”
The market expects the Federal Reserve to cut its benchmark overnight borrowing rate by another 25 percentage points when it meets on December 17-18. This follows reductions of half a percentage point and a quarter of a percentage point in September and November respectively.
“As of today, my preference is to continue the work we have started and return monetary policy to a more neutral environment,” Waller said.
Waller said he would pay close attention to upcoming employment and inflation data. The U.S. Bureau of Labor Statistics will release job openings and nonfarm payrolls reports this week, with the latter coming after employment rose by just 12,000 in October, mainly due to worker strikes and weather problems.
Waller said that despite the slowdown in inflation progress, the health of the broader economy made him feel it was appropriate to continue to ease monetary policy.
“After we cut interest rates by 75 basis points, I believe there is strong evidence that policy continues to be significantly constrained, and another rate cut will only mean we are not pressing the brake pedal as hard,” he said.
