Christopher Waller, the governor of the Federal Reserve, stated on Monday that while he is expecting an interest rate cut in December, he is worried by recent inflationary developments that may cause him to reconsider.
In remarks before a monetary policy forum in Washington, Waller stated, “At this time, I lean toward supporting a cut to the policy rate at our December meeting, given the economic data available today and projections that indicate inflation will continue on its downward path to 2 percent over the medium term.”
But he pointed out that the choice would rely on whether the data we have beforehand surprises us with positive results and changes my prediction for the inflation trajectory.
Recent data, according to Waller, suggests that inflation trend may be halting.
The personal consumption expenditures price index, the Fed’s preferred measure of inflation, showed headline inflation rising to 2.3% yearly in October while core prices—which do not include the price of food and energy—rose to 2.8%. The Fed aims for a rate of 2%.
The report indicated an increase from the previous month, which was proof that the central bank’s target has proven difficult despite the progress, even though it was in line with Wall Street’s forecasts.
Regarding mixed martial arts, Waller remarked, “I feel like an MMA fighter who keeps getting inflation in a choke hold, waiting for it to tap out, but it keeps slipping out of my grasp at the last minute.” However, let me reassure you that since inflation isn’t going away, capitulation is unavoidable.
When the Fed meets on December 17–18, markets anticipate that it will cut its benchmark overnight borrowing rate by another quarter percentage point. That would come after September’s half-point cut and November’s quarter-point cut.
According to Waller, as of right now, I lean toward carrying out the work we have begun to get monetary policy back to a more neutral stance.
Waller stated that he will keep a careful eye on upcoming inflation and employment data. This week, the Bureau of Labor Statistics will report on nonfarm payrolls and job vacancies. The latter will follow October’s increases, which were a pitiful 12,000, mostly as a result of weather-related problems and labor strikes.
Waller stated that he believes it will be acceptable to maintain loosening monetary policy despite the slowed progress on inflation due to the overall soundness of the economy.
“I think the evidence is strong that policy continues to be significantly restrictive after we cut by 75 basis points,” he said, adding that cutting again would only indicate that we aren’t pushing the brake pedal as hard.
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