If inflation data cooperates, the US Federal Reserve may lower interest rates three or four times this year, with a first cut potentially occurring before July, a senior bank official stated Thursday.
Headline: As energy costs surged in December, consumer inflation increased for a third consecutive month, according to data released Wednesday. However, a closely monitored indicator decreased marginally, suggesting underlying inflation may be slowing.
“The inflation we received yesterday was excellent,” Fed Governor Christopher Waller told CNBC, adding that every month, underlying price pressures that do not include volatile food and energy prices had been near target. Since September, the US central bank has lowered interest rates by a whole percentage point to support the labour market.
At their most recent rate decision in December, Fed policymakers decided to lower rates by a quarter percentage point to between 4.25 and 4.50. This year, they only planned to lower rates twice. Waller, a permanent voting member of the Fed’s rate-setting committee, told CNBC that, depending on the facts, he would favour decreasing rates up to four times this year.
He added that if the data didn’t “cooperate,” the Fed might reduce rates once or twice this year. “I may be a little more optimistic about inflation coming down than the rest of my colleagues,” he said. Waller responded that it was “reasonable” to believe rate cuts were necessary if the facts arrived as he had anticipated.
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