Christopher Waller, the governor of the Federal Reserve, stated on Thursday that before he is ready to back interest rate reductions, he will need to see more proof that inflation is down.
(Photo : by Sarah Silbiger/Getty Images)Christopher Waller, the governor of the Federal Reserve, stated on Thursday that before he is ready to back interest rate reductions, he will need to see more proof that inflation is down.
In a policy address that was given in Minneapolis and ended with the query, "What's the rush?" Regarding rate cuts, the central bank official stated that January's higher-than-expected inflation figures prompted concerns about the direction of prices and the appropriate course of action for the Fed.
Waller, a permanent voting member on the Federal Open Market Committee (FOMC), expressed concerns about the recent high reading on CPI inflation, suggesting it could indicate a potential stall in the significant progress made on inflation over the past year. While Waller still anticipates the FOMC to initiate rate reductions later this year, he highlighted "predominately upside risks" to his expectation that inflation will decline to the Fed's 2% target.
Waller pointed out that strong 3.3% annualized growth in gross domestic product (GDP) and robust employment figures provide few indications that inflation will fall below 2% in the near future.
Given these factors and the absence of signs pointing towards a looming recession, Waller emphasized the importance of exercising patience in the decision to ease policy. He emphasized the need for additional inflation data over the next couple of months to determine whether the recent uptick in inflation was merely a temporary setback or a more significant concern.
Fed's Assessment on Rate Adjustments and Economic Data
The comments are in line with the central bank's overall view that, although more rate increases are improbable, the timing and speed of reductions are not guaranteed.
According to the inflation statistics Waller cited, the consumer price index increased by 0.3% in January and by 3.1% from the same time last year, both of which were better than anticipated. With food and energy excluded, the core CPI increased by 0.4% in the month and ran at an annual rate of 3.9%.
After analyzing the data, Waller predicted that the Fed's favored inflation measure, core personal consumption expenditure prices, would show a 2.8% 12-month jump when it is announced later this month.
He stated that the case for waiting is strengthened by such high readings and that he would be observing statistics on consumer spending, employment, and earnings and compensation in order to find out more information on inflation. January saw an unexpected 0.8% decline in retail sales while payroll growth jumped by 353,000 throughout the month, above forecasts.
Waller stated that he maintains the expectation that it will be appropriate at some point this year to initiate monetary policy easing, but emphasized that the timing and extent of such actions will hinge on incoming economic data. He expressed the belief that the Federal Reserve can afford to delay monetary policy adjustments for a little while longer.
Market expectations have shifted in recent weeks, with a previously high probability of a rate cut at the Fed's March 19-20 meeting now being scaled back to the June meeting, as indicated by fed funds futures bets tracked by the CME Group. There is now a roughly one-in-three chance that the FOMC may even postpone action until July.
Fed Vice Chair Philip Jefferson had earlier in the day stated that he only expected easing "later this year," without offering a timeline.
During her speech, Governor Lisa Cook also mentioned the Fed's accomplishments in lowering inflation without severely damaging the economy.
Cook stated she "would like to have greater confidence" that inflation is on a sustained path, returning to 2% before moving, even if she still anticipates cutting this year.
