Federal Reserve Governor Christopher Waller said that to decide on easing monetary policy, which provides for a cut in interest rates, it is necessary to receive several more positive reports on the dynamic of inflation.
Mr. Waller noted that maintaining the cost of borrowing at the current level over the next three or four months will not hurt the state of affairs in the US economic system. According to him, the data on consumer prices in the United States in April was an encouraging signal that price pressures are not on a growth trajectory. In this context, he also stated that the mentioned information from last month probably indicates that progress has resumed towards achieving the inflation target of the United States financial regulator, which is 2%.
Christopher Waller made the mentioned statements on Tuesday, May 21, at the Peterson Institute for International Economics. Moreover, he noted that against the background of the absence of significant weakening in the labor market, it is necessary to record positive inflation data for several more months in a row before making a confident decision to ease monetary policy.
Christopher Waller drew particular attention to his opinion that currently there are no signs that maintaining the current level of borrowing costs over the next three or four months will provoke a sharp downturn in the economic system of the United States. It is worth noting that he belongs to a group of Fed officials who hold the view that the US financial regulator may be forced to maintain the present interest rate indicator for a longer period than initially expected.
At the end of last year, the expert community was quite optimistic about the prospects for easing the monetary policy of the central bank of the United States in 2024. After extremely disappointing inflation data were recorded in March, the mentioned vision of the prospects deteriorated significantly. Against the background of the indicators of the first month of spring, opinions began to spread that the Fed would be able to decide on lowering the cost of borrowing at the end of the year and only if there was a further positive scenario for the dynamic of the economic situation. Also, disappointing data for March led to the emergence of views that the financial regulator of the United States may not ease monetary policy at all in 2024. The April data improved the assessment of the prospects that the Fed will start cutting interest rates in the current year. Subject to the materialization of the most optimistic scenario, the central bank of the United States will make the mentioned decision in September.
Since July, the cost of borrowing in the US has remained unchanged. Currently, this indicator is at a level corresponding to a 23-year high.
Christopher Waller positively assessed the data on the dynamic consumer prices in the United States last month. This information indicates that the key gauge of underlying inflation slowed in April for the first time in six months. He also noted that last month’s data showed modest progress in achieving the United States central bank’s inflation target.
Christopher Waller is convinced that the subsequent increase in interest rates is probably not a necessary decision, the adoption of which is due to the circumstances of the current configuration of economic reality in the US. He also expects a lowering of the cost of borrowing. This point of view should probably be interpreted as the fact that Christopher Waller has a high level of confidence about the prospects for cutting interest rates in the United States in the foreseeable future.
Mr. Waller noted that the current monetary policy of the US financial regulator has positive results. In this context, he also stated the expectation that in the coming months, high interest rates will put more downward pressure on the economic system of the United States.
Atlanta Fed President Raphael Bostic, speaking with reporters on Tuesday, said that officials at the US central bank are currently rethinking the possibility that the historically low cost of borrowing that was observed before the coronavirus pandemic may return. He does not expect the Fed to start cutting interest rates before the fourth quarter of the current year.
As we have reported earlier, Jerome Powell Keeps Hopes Alive for Interest-Rate Cut.
