Fed’s Waller says he’s now leaning towards cutting interest rates in December

WASHINGTON, Dec 2 (Reuters) – Federal Reserve Governor Christopher Waller said on Monday he is leaning toward lowering the benchmark interest rate at its Dec. 17-18 meeting because monetary policy remains restrictive enough to continue to impose a downward pressure on inflation. pressure, while the labor market is roughly in balance, which is what the Fed wants to maintain.

Waller said: “Policy remains sufficiently restrictive that further cuts at our next meeting will not materially change the stance of monetary policy and leave sufficient room to slow the pace of rate cuts later if necessary to keep achieving inflation. Progress on Target.” Comments were made at a central bank seminar organized by the American Institute for Economic Research.

Waller, meanwhile, said upcoming data on jobs, inflation and consumer spending could still give him pause if inflation progress appears to be stalling.

“All this information will help me decide whether to cut rates or skip them. As of today, I am leaning toward continuing the work we have started, returning monetary policy to a more neutral environment” and continuing to cut rates, Waller said. With inflation soaring to a 40-year high in 2022, this is a key voice in determining the Fed’s response to inflation.

The Fed began cutting interest rates by half a percentage point in September, followed by a 25 basis point cut in November.

A further 25 basis points rate cut is expected in December, but recent inflation data has raised concerns that progress may have stalled. One key indicator, the personal consumption expenditures price index excluding food and energy costs, has hovered in a range of 2.6% to 2.8% since May, well above the Fed’s 2% target.

“If the data we receive between today and the next meeting surprise and suggest that our forecasts for slower inflation and a slower but still solid economy are wrong, then I will support maintaining policy,” Waller said. Interest rates remain unchanged.”

Interest rates are also likely to continue falling next year, but the pace and extent of the decline remains to be determined, he said. The Federal Reserve will release new economic forecasts at its next meeting to show how much officials expect to cut their benchmark interest rate next year.

The interest rate is currently set between 4.5% and 4.75%.

“There is strong evidence that policy continues to be very constrained and another rate cut will just mean we don’t hit the brake pedal as hard,” Waller said. “I expect rate cuts to continue next year until we get to a more neutral path. Policy rate setting.”

Fitness enthusiast Waller feeds his fight with inflation as an MMA fighter in the sport’s unique arena.

“Let me assure you, capitulation is inevitable – inflation is not going out of the octagon,” Waller said. (Reporting by Howard Snyder; Editing by Andrea Rich)