Christopher Waller points to stronger-than-expected GDP and inflation, suggesting a gradual rate reduction ahead
Federal Reserve Governor Christopher Waller indicated that future interest rate cuts will proceed more cautiously than the aggressive reduction seen in September, according to CNBC.
Waller expressed concern that the US economy may still be growing at a pace faster than desired, as highlighted in recent reports on employment, inflation, GDP, and income.
“The data is signaling that the economy may not be slowing as much as desired,” Waller said during a conference at Stanford University.
In September, the Federal Open Market Committee made an unusual move, cutting the baseline interest rate by half a percentage point to a target range of 4.75 to 5.00 percent.
Traditionally, the Fed adjusts rates in increments of 25 basis points, except during times of crisis. Along with the cut, officials signalled the possibility of another half-point reduction before the end of 2024, with an additional percentage point cut in 2025.
However, Waller did not commit to a definite course, stating, “Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year.”
Recent economic data has been mixed. The US labour market showed strength in September after weakening over the summer, inflation slightly exceeded expectations, and GDP remained robust.
The Commerce Department revised second-quarter growth upward, with gross domestic income gaining 3.4 percent, a notable increase from the previous estimate of 1.3 percent.
The savings rate was also revised higher to 5.2 percent.
“These revisions suggest that the economy is much stronger than previously thought, with little indication of a major slowdown in economic activity,” Waller added.
