Fed governor Chris Waller said Tuesday he believes interest rates need to stay put as sticky inflation clouds the timeline of a Fed rate cut.
Yahoo Finance’s Jennifer Schonberger reports:
“While the April inflation data represents progress, the amount of progress was small,” Waller said in a speech in Washington. “In the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy.”
Waller said the latest April reading from the Consumer Price Index was a “reassuring signal” but also gave it a C+ grade, calling the easing “so modest” it didn’t change his view that more evidence of cooling inflation is needed.
CPI on a “core” basis, which strips out food and energy prices, rose 3.6% year over year, a cooling from the 3.8% increase seen in March. That followed a first quarter where the readings were consistently hotter than expected. The Fed’s goal is to get inflation down to 2%.
Waller became the latest central bank official to stress a higher-for-longer stance. On Monday, Fed Vice Chair Philip Jefferson and Fed Vice Chair for Supervision Michael Barr both called for holding rates where they are, allowing more time for restrictive policy to work.
Meanwhile, Fed Chair Jerome Powell made it clear last week that he thinks the Fed will need more than a quarter’s worth of data to really make a judgment on whether inflation is steadily falling toward 2%. Waller appears to want more, noting he would like to see “several” months of data.
That implies it will take more than three inflation reports for the Fed to feel confident about lowering rates from a 23-year high, putting the odds on a first rate cut in September at the earliest if the data supports such a move.
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