Christopher Waller, a director of the US Federal Reserve System (Fed), shared that the US inflation rate is dropping, so there is no need for further interest rate hikes.
On May 21, CNBC reported that Waller said in a speech at the Peterson Institute for International Economics (PIIE) in Washington, D.C., that data indicates U.S. inflation is easing, but more certainty is needed before cutting rates.
Waller stated, “The data shows that inflation is not accelerating. I believe that a further increase in the policy rate is unnecessary,” revealing his trust in the current monetary policy.
Waller highlighted that the Fed’s high interest rates have reduced demand that had driven inflation to its highest level in over 40 years, citing recent sluggish retail sales and a slowdown in manufacturing and services.
He also stated that although jobs have increased, the increase in job leavers indicates the tight labor market that has been pushing up wages is starting to loosen.
Waller, who has a permanent voting seat in the Fed’s Federal Open Market Committee (FOMC), emphasized that he is not prepared to support a rate cut at the moment.
He said that the US economy is finally moving in the direction that the FOMC wanted and that he could support monetary easing after seeing more positive inflation improvement data in the coming months, given that the labor market is not showing clear signs of decline.
In April, the US Consumer Price Index (CPI) recorded 3.4% year-on-year, showing a downward trend for the first time this year.
Waller said he was relieved by the April CPI, but the progress in price reduction is too small and his view has not changed, rating the inflation report a C-.
Earlier this year, the market expected the Fed to cut interest rates at least six times from March, but as the CPI rose from January to March, the expected timing was postponed to September.
Waller avoided mentioning the expected timing or scale of the rate cut.
The Fed Watch Tool of the CME Group is currently predicting that the Fed will cut the interest rate by 0.25% twice this year.
The US benchmark interest rate has been raised 11 times over the past two years and currently stands at 5.25~5.5%.
