Another reduction still in order despite recent inflation, jobs data, he says — unless new numbers change his mind Call 848-329-0752
- December 03, 2024
While some have argued that recent economic data makes a case for the Federal Reserve to skip a rate cut in December, one central bank governor has said that he currently believes a rate cut remains in order — unless new numbers change his mind between now and the Fed’s Dec. 12 meeting.
Speaking at the American Institute for Economic Research Monetary Conference, Christopher Waller said that despite “significant progress in reducing inflation” toward the Fed’s stated 2% goal, there is some evidence that has raised the possibility that progress may be “stalling at a level meaningfully above 2%.” Call 848-329-0752
Such data includes October’s employment report, which showed an alarmingly small rise in the number of jobs and suggested to some that there may be a simmering weakness in the labor market. Meanwhile, inflation, based on the U.S. Department of Commerce’s personal consumption expenditures (PCE) metric, rose more than expected in September and October, as did core PCE, which excludes volatile food and energy prices.
“This risk has raised concerns that the [Federal Reserve’s policy-setting committee] should consider holding the policy rate constant at our upcoming meeting to collect more information about the future path of inflation and the economy,” Waller said. “Based on the economic data in hand today and forecasts that show that inflation will continue on its downward path to 2 percent over the medium term, at present I lean toward supporting a cut to the policy rate at our December meeting. But that decision will depend on whether data that we will receive before then surprises to the upside and alters my forecast for the path of inflation.” Call 848-329-0752
Waller noted that October’s tepid employment report was expected, given the temporary impacts of the since-ended strike at Boeing and two hurricanes striking the Southeast. He cited figures such as a low number of layoffs and a winnowing unemployment rate as indications that the job market, despite some moderation, remains healthy.
Inflation, on the other hand, remains somewhat puzzling, Waller noted, though he did point out that 12-month housing inflation has softened and goods prices have begun deflating.
“Overall, I feel like an MMA fighter who keeps getting inflation in a choke hold, waiting for it to tap out yet it keeps slipping out of my grasp at the last minute,” Waller quipped. “But let me assure you that submission is inevitable — inflation isn’t getting out of the octagon.”
Waller concluded by saying that he remains solid in the view that the cuts to begin this current lowering cycle did not represent an overcorrection, and that another rate cut at December’s meeting “will only mean that we aren’t pressing on the brake pedal quite as hard.”
“Policy is still restrictive enough that an additional cut at our next meeting will not dramatically change the stance of monetary policy and allow ample scope to later slow the pace of rate cuts, if needed, to maintain progress toward our inflation target,” he said. “That said, if the data we receive between today and the next meeting surprise in a way that suggests our forecasts of slowing inflation and a moderating but still-solid economy are wrong, then I will be supportive of holding the policy rate constant. I will be watching the incoming data closely over the next couple weeks to help me make my decision as to what path to take.” Call 848-329-0752