Federal Reserve President Chris Waller said Wednesday night that he is in no hurry to cut interest rates after strong inflation data for the first two months of the year.
“There is no need to rush to lower policy rates,'' Waller said in a speech in New York.
Recent data suggests that “to keep inflation on a sustainable trajectory towards 2%, it is probably prudent to keep interest rates in their current restrictive stance for longer than previously thought.” It will tell you that.”
Waller still expects to cut rates this year, but he is not prepared to do so unless there is further evidence that inflation continues to fall.
Waller's stance Wednesday was more cautious than recent comments from Fed Chairman Jay Powell and Chicago Fed President Austan Goolsby. Both men said last week that despite the higher-than-expected numbers in January and February, the basic story about falling inflation remained unchanged.
However, Atlanta Fed President Rafael Bostic said Friday that he currently expects only one rate cut this year, and believes it will occur later this year than previously expected.
Last Wednesday, the Federal Reserve decided to keep interest rates on hold and maintain the outlook for three rate cuts this year. Officials also raised their expectations for inflation and economic growth.
The decision to maintain a policy of three rate cuts this year (the same number as expected in December) was based on the belief that the persistence of inflation data would prompt authorities to reduce the number of rate cuts in 2024. It was received and carried out.
Core consumer prices based on the Consumer Price Index rose at an annual rate of 3.8% in February, following an annual increase of 3.9% in January. These numbers are down from last year's levels of around 5.5%, but still nearly double the Fed's 2% inflation target.
Waller said an analysis of three- and six-month measurements of the consumer price index, which excludes volatile food and energy prices, shows that inflation has slowed and may be stagnant. Stated.
The Fed chief said he needs to see improving inflation data for at least a few months before he has enough confidence that starting to cut interest rates will keep the economy moving towards 2% inflation.
“Waiting a little longer before cutting rates is much less risky than acting too soon,” Waller said. “We don't want to cut policy rates too soon and risk a sustained rebound in inflation.”
Another key indicator Waller will be watching is the release of the personal consumption expenditure (PCE) price index for February this Friday.
The report includes “core” PCE inflation, a Fed-recommended measure that expects monthly price increases to moderate from the previous month.
Waller said that if the situation does not improve, the central bank is considering reducing the number of rate cuts overall this year, or delaying them further, given recent statistics. But he said he was in no rush to take that step just yet.
At last week's meeting, several policymakers removed one or more cuts from their outlook. The number of policymakers expecting three or more cuts this year has fallen, while the number expecting two or fewer has increased.
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