Federal Reserve Gov. Chris Waller said there’s “no rush” to reduce U.S. interest rates in light of stronger-than-expected readings on inflation and economic growth early in the new year.
“The data that we have received since my last speech [on Jan. 16] has reinforced my view that we need to verify that the progress on inflation we saw in the last half of 2023 will continue,” Waller said at a speech in Minneapolis on Thursday night. “And this means there is no rush to begin cutting interest rates to normalize monetary policy”
Waller and other Fed officials have made a concerted effort in the past few weeks to brush back Wall Street’s previous forecasts for rate cuts as early as March.
Waller had been one of the more hawkish Fed officials in 2022 and 2023 in urging higher rates to squash inflation, but he began to soften his tone toward the end of last year as inflation waned.
Yet like other senior Fed officials, Waller said he wants to see more proof that inflation is slowing toward the central bank’s 2% target before he’ll support a reduction in interest rates.
The most recent inflation reports in January haven’t bolstered the case for rate cuts anytime soon: Both the consumer and producer price indexes came in hotter than expected.
“Last week’s report on consumer prices in January was a reminder that ongoing progress on inflation is not assured,” Waller said.
“While I believe inflation is likely on track to reach 2% in a sustainable manner, I am going to need to see more data to sort out whether January’s CPI inflation was more noise than signal,” he said.
“This means waiting longer before I have enough confidence that beginning to cut rates will keep us on a path to 2% inflation,” he added.
Waller also doesn’t think the current level of interest rates — the highest in 23 years — is going to do serious damage to the U.S. economy.
“There are no indications of an imminent recession,” he said.
Wall Street appears to have gotten the Fed’s unified message: Traders are now betting that the first reduction in rates likely won’t take place until late spring or early summer. Previously, they were predicting a rate cut as soon as March.