Federal Reserve Governor Christopher Waller said Friday that “the time has come” for the U.S. central bank to begin a series of rate cuts this month, adding that he was open-minded about the size and pace of those reductions.
“If the data supports cuts to consecutive meetings, I think it will be appropriate to make cuts to consecutive meetings,” Waller said in a speech prepared to be delivered at the University of Notre Dame.
“If the data suggests that deeper cuts are needed, I will also support that. I have been a strong advocate of bringing forward rate increases when inflation accelerates in 2022, and I will support introducing cuts if that is appropriate.”
The expectation is that the US central bank will cut the interest rate, currently between 5.25% and 5.50%, at its meeting on September 17 and 18, especially after Fed Chairman Jerome Powell said two weeks ago that “the time has come” to ease monetary policy, given the trend of inflation and the cooling of the labor market.
Waller used the same phrase, but his speeches were more forceful and signaled his willingness to initiate interest rate cuts with a reduction greater than 0.5 percentage points.
Data released Friday showed that the quarterly average of monthly job creation now stands at 116,000, below what many economists estimate is needed to meet the job growth needs of an expanding population. That, along with other recent data, “reinforces the idea that there has been continued moderation in the labor market,” Waller said.
While the data points to a slowdown but not a deterioration, and the economy does not appear to be heading for a recession, he said that “the current data set calls not for more patience but rather for action” as the Fed’s monetary policy focus shifts from a position that prioritizes inflation to maintaining full employment.
Waller also noted progress in reducing inflation.
Wage growth has slowed “consistently” with the Fed’s 2% inflation target, he said.
Inflation is now on track to meet the Fed’s target, Waller said, with underlying inflation, as measured by the change in the core PCE price index, at 2.6% on a six-month annualized average and 1.7% on a three-month annualized average.
Source: Terra
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