Federal Reserve Governor Christopher Waller speaks during the Clearing House's annual meeting on November 12, 2024 in New York City.
Brendan Mcdermid | Reuters
Federal Reserve Governor Christopher Waller said Monday he expects a rate cut in December but is concerned about recent inflation trends that could change his mind.
“Based on today's economic data and forecasts that show inflation will continue its downward trend to 2 percent over the medium term, I am currently leaning toward supporting a rate cut at our December meeting,” Waller said in remarks to a monetary policy forum in Washington .
However, he noted that the “decision will depend on whether the data we will receive by then surprises positively and changes my forecast for the development of inflation.”
Waller cited recent data that suggested progress on inflation may have “stalled.”
In October, the Fed's preferred inflation indicator, the Personal Consumption Expenditure Price Index, showed headline inflation rising to 2.3% annually and core prices, which exclude the cost of food and energy, rising to 2.8%. The Fed is aiming for an interest rate of 2%.
Although the data was in line with Wall Street's expectations, it showed an increase from the previous month and was evidence that the central bank's target has proven unattainable despite the progress.
“Overall, I feel like an MMA fighter who keeps putting a stranglehold on inflation, waiting for it to run out, but it keeps slipping away at the last moment,” Waller said, referring to mixed doubles Martial arts. “But I assure you that submission is inevitable – inflation is not getting out of the octagon.”
Markets expect the Fed to cut its federal funds rate by another quarter of a percentage point at its meeting on December 17th and 18th. This would follow a half-point decline in September and a quarter-point decline in November.
“As of today, my inclination is to continue the work we started to return monetary policy to a more neutral environment,” Waller said.
Waller said he would closely monitor upcoming employment and inflation data. The Bureau of Labor Statistics will release reports on job vacancies and nonfarm payrolls this week, the latter coming after increases of a meager 12,000 in October, largely due to labor strikes and weather concerns.
Despite the slowing progress on inflation, Waller said that given the overall economic situation, he felt it was appropriate to further ease monetary policy.
“Having cut rates by 75 basis points, I think there is strong evidence that policy remains significantly hawkish and that cutting again will just mean that we are not pushing the brakes quite as hard,” he said .
Also on Monday, New York Fed President John Williams expressed confidence that inflation is falling and said he still believes policy is likely to move to a more “neutral” position over time. but without giving any details.
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