Federal Reserve Governor Christopher Waller said on Wednesday that he was open to reducing the level of interest rate hikes soon, as long as economic data cooperates.
The Federal Open Market Committee responsible for setting rates is due to meet on December 13-14. Markets expect policymakers to approve another rate hike, but this time opting for a move of 0.5 percentage points, or 50 basis points. This would come after the approval of four consecutive increases of 0.75 percentage points.
“As for the December FOMC meeting, the data over the past few weeks has made me more comfortable considering going back to a 50 basis point bull,” Waller said in prepared remarks for an event. in Phoenix. “But I won’t pass judgment on that until I see more data, including the next PCE inflation report and the next jobs report.” One basis point is equal to 0.01 percentage point.
Christopher Waller testifies before the Senate Banking, Housing, and Urban Affairs Committee during a hearing on their nomination as member designate of the Federal Reserve Board of Governors on February 13, 2020 in Washington, DC.
Sarah Silbiger | Getty Images
The next PCE inflation report is due on December 1st.
Investors have become optimistic that a weaker-than-expected increase in the consumer price index for October indicates that inflation is slowing. The headline CPI rose 0.4% for the month and 7.7% from a year ago, while the core index excluding food and energy rose 0.3% and 6. 3%, respectively. All readings were below market estimates.
The Fed favors the price measure of basic personal consumption expenditure, which rose 0.5% in September and 5.1% from a year ago, as an indicator of rising prices.
Waller said he would be watching the data closely as it remains suspicious that October’s CPI readings confirmed a new trend. As Governor, he is an automatic FOMC voter.
“While good news, we have to be careful not to read too much into a single inflation report. I don’t know how sustained this deceleration in consumer prices will be,” he said. “I can’t stress enough that a report doesn’t trend. It’s far too early to conclude that inflation is headed down sustainably.”
In making his assessment, Waller said he will look at three main data points outside of general inflation readings: prices of basic goods, housing and non-housing services. He said he saw encouraging signs on all three fronts but would need to see more and vowed not to be “rigged by a report”.
“Like many others, I hope this [CPI] report is the start of a significant and persistent fall in inflation. But policymakers cannot act on the basis of hope,” he said.
Earlier in the day, San Francisco Fed President Mary Daly told CNBC that she expects at least another percentage point rate hike to come. The Fed’s benchmark rate is currently in a target range between 3.75% and 4%.