Fed Should Delay or Reduce Cuts on Recent Data: Waller

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Bloomberg Mar 28 02:35 · 18.7k Views

Federal Reserve Governor Christopher Waller said he wants to see “at least a couple months of better inflation data” before cutting, as there is no rush to lower interest rates. Waller spoke Wednesday before the Economic Club of New York.

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Transcript

  • 00:00 In my view, it is appropriate to reduce the overall number of rate cuts
  • 00:05 or push them further into the future
  • 00:07 in response to the recent data.
  • 00:10 This just reflects the reality of managing an outlook in real time
  • 00:14 as data comes in.
  • 00:16 Now, subsequent data may well alter this outlook again,
  • 00:20 but we shall see.
  • 00:22 Based on what we know now, there is no urgency in taking that step.
  • 00:28 So where do I see things standing?
  • 00:30 I see economic output
  • 00:32 and the labor market showing continued strength
  • 00:35 while progress in reducing inflation has slowed
  • 00:39 because of these signs, I see no rush
  • 00:43 in taking the step of beginning to ease monetary policy.
  • 00:47 The target range for the federal funds rate has been 5:00 and 4:45 and a half percent since last July,
  • 00:53 and I believe that this restricted level is helping to reduce imbalances
  • 00:58 in the economy and continuing to put downward pressure on inflation.
  • 01:03 All indications are that the economy continues to grow at a healthy pace.
  • 01:08 While retail sales and some other indicators suggest a softening in demand
  • 01:13 this quarter
  • 01:15 from the second-half of last year when growth accelerated.
  • 01:18 The evidence for a significant slowdown is sparse.
  • 01:22 Meanwhile, as the labor market continues to add jobs at a rapid pace,
  • 01:27 some signs point to improvement in the imbalance between supply and demand,
  • 01:31 but others indicate continued tightness.
  • 01:37 My judgment on the balance of risk for monetary policy, which I explained in a speech on February 22nd, hasn't changed.
  • 01:45 The risk of waiting a little longer to cut rates is significantly lower than acting too soon.
  • 01:52 Cutting the policy rate too soon and risking A sustained rebound in inflation
  • 01:57 is something I definitely want to avoid.
  • 02:00 As a result, in the absence of an unexpected
  • 02:05 and material deterioration
  • 02:07 in the real economy,
  • 02:09 I'm going to need to see at least a couple of months of better inflation data
  • 02:13 before I have enough confidence
  • 02:16 that beginning to cut rates will keep the economy on a path to 2% inflation.
  • 02:22 Fortunately, we can wait and see how the data come in
  • 02:24 before deciding the appropriate time to start lowering the policy rate.
  • 02:28 The remarkable U.S.
  • 02:29 economy keeps on chugging along,
  • 02:32 adding jobs at a rate that over time will keep unemployment near its current
  • 02:37 historically low rate.
  • 02:40 But the overall strength of the US economy makes it a fairly easy decision
  • 02:44 to wait a little longer
  • 02:47 to get a better understanding of the trajectory of inflation
  • 02:51 and, when appropriate,
  • 02:53 to begin easing policy.