Federal Reserve Governor Christopher Waller said Thursday that the central bank may cut interest rates several times this year if inflation declines as it expects.
In an interview with CNBC, the policymaker said he expects the first cut to come in the first half of the year, with others to follow as long as economic data on prices and unemployment are cooperative.
“As long as the data comes back good on inflation or continues on that path, I can certainly see interest rate cuts happening sooner than markets expect,” Waller said during a press conference.Peep in the street“Interview with Sarah Eisen.
Asked how many advances that could entail, he replied: “It's all going to be data-driven. I mean, if we make a lot of progress, you can do more,” which he said could mean three or four, assuming a quarter of a percentage. Point increments.
“If the data is not cooperative, we will go back to two and maybe move to one, if we get a lot of sticky inflation,” he said.
Traders increased their bets on a more aggressive pace of interest rate cuts after Waller's comments. The implied market odds of a move in May have risen to about 50%, although June appears to be the better bet, according to CME Group data. Expectations for a second cut by the end of the year have risen to about 55%, or about 10 percentage points higher than before he spoke.
At the heart of Waller's easing hopes is a belief that inflation will ease further as the year goes on, despite several months of data showing some key prices holding steady. the Consumer price index It slowed to a core reading of 3.2%, excluding food and energy, for December, down 0.1 percentage point from the previous month although still well above the Fed's 2% target.
“For now, I think inflation will continue to move towards our target. On an annual basis, I think the plateau we saw in 2024 will start to fade,” he said. “So I'm probably a bit more optimistic about lower inflation than the rest of my colleagues, and that's what drives my outlook for the policy path.”
At the December meeting, FOMC members proposed two cuts for 2025, although comments after the meeting suggested a cautious and patient approach.
The Federal Open Market Committee (FOMC) next meets on January 28-29, when there is almost no chance of movement in the markets.
“Well, in January, we need to see what happens,” Waller said. “We are not in a rush to do things.”
