The Fed’s Waller says officials can “wait, watch and see” before acting on interest rates

  • Federal Reserve Governor Christopher Waller indicated on Wednesday that the central bank is able to postpone interest rate increases while it monitors incoming data.
  • “I think we can wait and watch and see how the economy develops before taking decisive steps on the interest rate path,” he said in prepared remarks for a speech in London.

Federal Reserve Governor Christopher Waller indicated on Wednesday that the central bank is able to postpone interest rate increases while it monitors progress in its efforts to reduce inflation.

As the Fed prepares to meet again in two weeks, Waller said he is examining the latest data points against each other to see whether the central bank is succeeding in lowering demand and slowing inflation, or whether the economy continues to show resilience and press harder on the economy. the prices.

“As of today, it is too early to know,” he said in remarks prepared for a speech in London. “Based on this, I believe we can wait, watch and see how the economy develops before taking decisive steps on the interest rate path.”

The comments come a day before Federal Reserve Chairman Jerome Powell delivers what could be a major policy speech in New York.

In recent days, several Fed officials have said that rising Treasury yields indicate that financial conditions are tightening, which could make additional interest rate hikes unnecessary. The yield on the 10-year Treasury note rose to 4.9% on Wednesday, the first since 2007.

In fact, Waller pointed to support in yields and said economic reports over the past few months have been “very positive” regarding inflation. He noted that widely watched indicators such as the Consumer Price Index and the Fed’s preferred personal consumption expenditures price index show three-month core inflation, respectively, at 3.1% and 2%.

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However, officials are concerned about misinformation about inflation that has confounded previous policy decisions. Few, if any, Fed officials see interest rate cuts in the future, but many are leaning toward the idea that the current rate hike cycle may be coming to an end.

Waller has been one of the most hawkish officials at the Fed, meaning he favors higher interest rates and tighter policy. As governor, he automatically gets a vote on the Federal Open Market Committee, which sets the interest rate. His statements indicated a near-term halt, without a commitment beyond that.

“If the real side of the economy declines, we will have more room to wait out any further interest rate increases and let the recent rise in long-term interest rates do some of our work,” he said. “But if the real economy continues to show fundamental strength and inflation appears to be stabilizing or accelerating, further policy tightening will likely be needed despite the recent rise in long-term interest rates.”

Recent economic reports showed a strong labor market, with the number of non-farm payrolls rising by 336,000 jobs in September. A Commerce Department report on Tuesday showed strong retail spending rose 0.7% in September, beating inflation and Wall Street estimates.

Waller said he will be watching this data as well as non-residential investment numbers such as factories, as well as construction spending and next week’s first look at third-quarter GDP growth.

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