FED Member Waller Discusses Potential Interest Rate Cut
In a recent address, FED Governor Christopher Waller delved into key economic issues such as inflation, the labor market, and future monetary policy adjustments. Waller emphasized the cautious approach of the FED in monitoring inflation trends, comparing the recent rise to a “roller coaster,” and highlighting the central bank’s evaluation of whether this upward trajectory will continue.
When discussing the labor market, Waller predicted a slowdown in employment growth and a gradual increase in the unemployment rate. However, he reassured that the unemployment rate would remain historically low, describing the current state of the labor market as “very healthy” with a balance between supply and demand.
Despite inflationary pressures, Waller noted that consumer demand remained strong. He anticipated a recovery in demand for commodities as consumers become more willing to make purchases with falling interest rates. Waller also pointed out that household consumption resources are in good shape and the economic foundation remains strong, potentially leading to accelerated GDP growth in the latter half of 2024.
However, Waller expressed disappointment with the latest inflation data, suggesting that the FED could proactively cut interest rates if inflation falls below the target of 2% or if the labor market deteriorates. On the other hand, if inflation unexpectedly rises, the central bank may pause planned rate cuts.
Looking ahead, Waller expects the FED to gradually adjust its policy to a neutral stance if the economy develops as forecasted. He also reiterated that the current policy rate would remain at a restrictive level and that there is an expectation of gradual reduction over the next year. However, Waller cautioned that recent events such as hurricanes and strikes in the Boeing industry could potentially hinder job growth by 100,000 in October.
In conclusion, Waller emphasized the need for caution when considering interest rate reductions, suggesting that the FED’s approach may be more conservative compared to the September meeting.
*This article does not constitute investment advice.
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