Federal Reserve Governor Christopher Waller stated on Monday that he foresees a potential interest rate reduction in December, but he is apprehensive about recent inflation trends that could influence his decision. Speaking at a monetary policy forum in Washington, Waller mentioned that he is inclined towards supporting a rate cut at the upcoming December meeting based on current economic data and forecasts projecting inflation to reach 2 percent in the medium term.
However, Waller emphasized that his decision will be contingent on upcoming data and any surprises that may alter his inflation forecast. He highlighted concerns about recent data suggesting a potential slowdown in inflation progress. In October, the Fed’s preferred inflation gauge, the personal consumption expenditures price index, indicated a rise in headline inflation to 2.3% annually and core prices (excluding food and energy costs) to 2.8%, both surpassing the Fed’s 2% target.
Despite meeting Wall Street expectations, the data revealed a slight increase from the previous month, underscoring the ongoing challenge in achieving the central bank’s inflation objective. Waller metaphorically likened the struggle with inflation to a mixed martial arts fight, expressing confidence that inflation will eventually be subdued.
Market expectations anticipate another quarter-point reduction in the Fed’s benchmark interest rate during the December 17-18 meeting, following previous cuts in September and November. Waller indicated his inclination to continue the process of adjusting monetary policy towards a more neutral stance, emphasizing the importance of monitoring employment and inflation data closely.
Waller acknowledged the upcoming release of reports on job openings and nonfarm payrolls by the Bureau of Labor Statistics, noting that October’s modest job gains were impacted by labor strikes and weather-related issues. Despite challenges in inflation management, Waller remains optimistic about the overall economic outlook, suggesting that further easing of monetary policy may be warranted.
Additionally, New York Fed President John Williams expressed confidence in the downward trajectory of inflation and hinted at the likelihood of transitioning policy towards a more neutral stance in the future, without providing specific details.
