On December 3, 2024, Christopher Waller, a member of the Federal Reserve Board, expressed his current inclination towards supporting another interest rate cut later this month, citing the expectation that inflation rates will decrease to 2%. Waller’s remarks were made during a central bank seminar held at the American Institute for Economic Research on Monday, December 2.
Waller stated that monetary policy still has sufficient constraints and that a further rate cut at the upcoming meeting would not significantly change the stance of monetary policy. This move could potentially leave room for a slower pace of rate cuts in the future to ensure progress towards the inflation target.
Seen as a barometer for U.S. monetary policy, Waller’s comments have raised investors’ expectations of a rate cut at the Fed’s meeting on December 17-18 to nearly 75%, leading to a decline in the yields of two-year U.S. Treasury bonds.
Federal Reserve officials are approaching the end of the blackout period before their public comments ahead of the December meeting. Atlanta Fed President Raphael Bostic mentioned on Monday that he does not believe the outcome of this meeting is predetermined.
Both Waller and Bostic emphasized the importance of inflation, employment, and consumer spending data released between now and the next Fed meeting in determining whether a rate cut is warranted as anticipated.
At the seminar on Monday, Waller stated that all this information would help him decide whether to cut rates or hold steady, indicating his preference to continue the Fed’s work towards bringing monetary policy back to a more neutral environment by continuing with rate cuts.
The Fed initiated rate cuts in September, totaling 0.5 percentage points, followed by another 0.25 percentage point cut in November. It is expected that there will be a further 0.25 percentage point cut in December, but recent inflation data has raised concerns that progress towards additional rate cuts may have stalled.