Federal Reserve's Christopher Waller Signals December Rate Cut, Predicts Inflation's 'Downward Path To 2%'

On Monday, Federal Reserve Governor Christopher Waller indicated he is “leaning toward” supporting an interest rate cut at the central bank’s December meeting while acknowledging recent inflation data has raised concerns about price pressures stalling above the Fed’s 2% target.

What Happened: Speaking at the American Institute for Economic Research Monetary Conference in Washington, D.C., Waller emphasized that monetary policy remains restrictive even after 75 basis points of cuts since September. He expects rate reductions to continue over the next year until reaching a more neutral policy stance.

“Based on the economic data in hand today and forecasts that show inflation will continue on its downward path to 2% over the medium term, at present I lean toward supporting a cut to the policy rate at our December meeting,” Waller said.

The comments come amid mixed signals from recent economic data. While GDP grew at a 2.8% annual pace in the third quarter of 2024, manufacturing activity continues to show slight deterioration. The labor market remains strong with unemployment at 4.1%, though wage growth has moderated to below 4% annually.

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Why It Matters: Waller’s dovish stance contrasts with more cautious comments from other Fed officials. Minneapolis Fed President Neel Kashkari recently suggested the central bank could hold rates steady if inflation data comes in hotter than expected before the December meeting.

After six consecutive months of easing, the annual inflation rate, as measured by the Consumer Price Index, reversed course in October,?climbing to 2.6% as expected.

The Fed’s policy decisions carry heightened significance following President-elect Donald Trump‘s recent victory. Wharton economist Jeremy Siegel argued that Fed Chair Jerome Powell‘s previously accommodative policies contributed to inflation pressures that influenced the election outcome.

Gordon Johnson, CEO of GLJ Research, criticized the Fed’s focus on asset prices, arguing its policies have exacerbated wealth inequality. “Fed needs to focus on the actual economy and if the economy does well, the stock market will be fine,” Johnson said.

According to the CME FedWatch Tool, 75.1% of traders expect the Fed to cut interest rates by 25 basis points at the Dec. 18 meeting.

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Disclaimer:?This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.