Federal Reserve Governor Christopher Waller on Tuesday ended speculation that interest rates may need to be raised, saying the latest inflation data is “reassuring” and that the bank’s benchmark rate US central is set appropriately.
After three months of stronger-than-expected price pressures that raised fears of stagnating progress, “more recent data on the economy indicates that restrictive monetary policy is helping to cool aggregate demand and inflation data for April suggest that progress toward 2 percent has likely resumed,” Mr. Waller said in remarks prepared for presentation at the Peterson Institute for International Economics. “Central bankers should never say never, but the data suggests that inflation is not accelerating, and I think further increases in the policy rate are probably not necessary.”
Fed policymakers have become cautious about the outlook for inflation and monetary policy in recent months, and Waller, like many of his colleagues, has not repeated the view he has expressed in recent speeches , namely that a reduction in rates is likely during the year.
The labor market remains strong, he said, and while consumer price inflation slowed in April after the first three months of the year, progress was “modest”, with inflation of base as measured by the Personal Consumption Expenditure Price Index likely amounting to 3.4% annualized over the past three months.
But he also said he sees signs of moderation, citing stagnant retail sales in April, rising delinquencies on credit cards and auto loans, and a widely followed survey of non-manufacturing businesses suggesting a deceleration of activity. Job creation also slowed and the unemployment rate rose to 3.9% in April.
“The economy now appears to be moving closer to the Committee’s expectations,” Waller said, referring to the Federal Open Market Committee, which sets central bank policy. “Nevertheless, absent a significant weakening of the labor market, I need several more months of good inflation data before I can support an easing of the monetary policy stance.
The Fed has kept its benchmark policy rate in the 5.25%-5.50% range since last July.
Traders expect the central bank to make its first rate cut in September and say the chances of a second cut at the Fed’s final meeting of the year in December are better than expectations. equal chances. (Reporting by Pete Schroeder, Ann Saphir, Lindsay Dunsmuir; Editing by Paul Simao)
