Fed official gives date for interest rate cut: 'I am inclined to support it'

Waller delivered a speech titled "Cut or Skip?" regarding the economic outlook at a conference organized by the American Institute for Economic Research.

Stating that after the Fed's 75 basis point cut in policy rates since the September meeting, monetary policy remains restrictive and he believes it is exerting downward pressure on inflation without creating unwanted weakness in the labor market, Waller conveyed that he expects interest rate cuts to continue throughout next year until the policy rate approaches a more neutral level.

However, Waller noted that recent data has increased the possibility that progress on inflation could stall at a level significantly above 2 percent.

Pointing out that this risk raises concerns that the Federal Open Market Committee (FOMC) should consider keeping the policy rate steady at the next meeting to gather more information about the future course of inflation and the economy, Waller stated the following: 

"Based on the economic data we have today and forecasts showing that inflation will continue to decline toward 2 percent in the medium term, I am currently inclined to support a reduction in the policy rate at our December meeting. However, this decision will depend on whether the data we receive before that date provides any upside surprises and whether it changes my forecasts regarding the path of inflation."

Waller expressed his belief that after the 75 basis point cut, evidence remains strong that policy continues to be significantly restrictive, and that cutting rates again would simply mean they are "not pressing the brake pedal quite as hard."

Stating that another factor supporting further interest rate cuts is that the labor market finally appears to have reached a balance, Waller noted that the goal should be to maintain this balance.

The Fed's next meeting will be held on December 17-18.

News Source: AA