In September, the U.S. Federal Reserve (Fed) lowered interest rates by 0.5%, signaling a potential slowing of future rate cuts.
On Monday, CNBC reported that Federal Reserve Governor Christopher Waller, speaking at a conference at Stanford University, suggested that the U.S. economy is performing better than anticipated, leading the Fed to reconsider the pace of future rate cuts.
Waller highlighted that recent data on employment, inflation, GDP, and income indicate that the U.S. economy is not cooling as much as expected. He cautioned that while the Fed should avoid overreacting to the latest figures, it will need to be more cautious in its monetary policy than the September Federal Open Market Committee (FOMC) meeting.
The Fed, which raised rates 12 times from 2022 through last year due to rapid inflation, lowered the rate by 0.5 percentage points during the September FOMC meeting, bringing it to a range of 4.75% to 5%.
Regarding the Fed’s indication that it might cut rates by 0.5 percentage points at each of the two remaining FOMC meetings this year, Waller stated that this does not imply a specific direction for interest rates.
Waller reaffirmed his belief that the Fed will gradually lower rates next year despite these short-term considerations. He also pointed to revised second-quarter GDP income (GDI) growth of 3.4% and a savings rate of 5.2%, both of which suggest that the U.S. economy remains stronger than expected, with few signs of an imminent slowdown.
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