Christopher Waller, governor of the US Federal Reserve, during the Fed Listens event in Washington, DC, on Friday, September 23, 2022.
Al Drago Bloomberg Getty Images
Federal Reserve Governor Christopher Waller on Monday signaled that future interest rate cuts will be less aggressive than the big move in September as he expressed concern that the economy could still be running at a hotter pace than expected.
Citing recent reports on employment, inflation, gross domestic product and income, the policymaker stated that “these data signal that the economy may not be slowing as much as expected.”
“While we don’t want to overreact to this data or see it through, I see the total data as saying that monetary policy should proceed with more caution in the pace of cutting rates than required in the September meeting,” Waller said in a speech prepared for a conference at the University Stanford.
The Federal Open Market Committee at its September meeting took the unusual step of lowering the key interest rate by half a percentage point, or 50 basis points, to a target range of 4.75%-5.0%. In the past, the Fed only did this during crises.
Along with those cuts, officials indicated the possibility of another half-point cut in the last two meetings in 2024, along with another full percentage cut in 2025. However, Waller did not commit to a specific path forward.
“Whatever happens in the near term, my baseline still calls for a gradual reduction in policy rates over the next year,” he said.
Key data points for the Fed have been mixed in recent days: The labor market posted stronger numbers in September after weakening over the summer, the consumer price index inflation index was slightly higher than expected, and GDP also remained strong.
In its final revision to second-quarter growth, the Commerce Department also raised the rate of gross domestic income to 3.4%, an adjustment of 2.1 percentage points from its previous estimate and closer to GDP. The savings rate was also set higher, to 5.2%.
“The revisions show that the economy is stronger than previously thought, with indications of a major slowdown in economic activity,” Waller said.
