Published: January 16, 2024 at 11:00 am ET
It's likely the Federal Reserve will be able to cut interest rates this year, but there's no need for “rushed policy,” Fed Governor Christopher Waller said Tuesday.
“When the time is right to begin cutting interest rates, I believe they can and should be cut methodically and carefully,” Waller said in a statement to the Brookings Institution.
While in…
It's likely the Federal Reserve will be able to cut interest rates this year, but there's no need for “rushed policy,” Fed Governor Christopher Waller said Tuesday.
“When the time is right to begin cutting interest rates, I believe they can and should be cut methodically and carefully,” Waller said in a statement to the Brookings Institution.
While the Fed has cut rates quickly and on a large scale in many past cycles, this year Waller sees “no reason to move as quickly or cut as quickly as in the past.”
Waller said he believes the Fed's interest rate policy is now “properly set.”
The healthy economy gives the Fed the flexibility to cut interest rates if inflation falls, he said. Otherwise the policy would be too restrictive when adjusted for inflation.
The timing and number of rate cuts will be determined by incoming data, he said.
Markets have priced in seven rate cuts this year as of the March meeting.
Last week, Fed officials tried to refute expectations of quick and rapid rate cuts. But the market held its ground.
“To paraphrase a former European Central Bank chief, the market heard the Fed's comments last week but didn't listen,” said Lou Crandall, chief economist at Wrightson ICAP.
Waller said he was pleased with the recent economic performance. The slowdown in GDP growth to a range between 1% and 2% in the last three months of the year, with unemployment below 4% and inflation near 2% in the last six months, “is almost as good as it gets he said.
“My outlook has left me more confident than I have been since 2021 that inflation is on track to 2%,” he said.
There are questions about whether it will last.
“Concerns about the sustainability of these data trends require that policy changes be carefully coordinated rather than rushed,” Waller said.
The government will make annual revisions to consumer inflation data in mid-February. Last year, the annual update deleted previous data that showed lower inflation, he noted.
“My hope is that the revisions confirm the progress we have seen, but good policy is based on data, not hope,” he said.
Shares DJIA SPX were lower in early post-holiday trading on Tuesday, while the 10-year Treasury yield BX:TMUBMUSD10Y rose to 3.99%.