Federal Reserve Governor Christopher Waller said Thursday that the central bank could cut interest rates multiple times this year if inflation falls as he expects.
In an interview with CNBC, the policymaker said he expects the first cut could come in the first half of the year, with more to come if economic data on prices and unemployment work together.
“As long as the inflation data is good or stays at that level, I certainly see rate cuts coming sooner than maybe the markets are pricing in,” Waller said during “Screaming in the street“interview with Sarah Eisen.
Asked how much that might mean, he replied: “Everything will be data-driven. “That means if we make a lot of progress, you can make more,” which he said could mean three or four, assuming it would be a quarter percent point increase.
“If the data doesn't match, we'll go back to two, and maybe even one if we have a lot of sticky inflation,” he said.
Following Waller's comments, investors increased their focus on a slightly more aggressive pace of interest rate cuts. The market chances of a move in May have increased to around 50%, although June seems to be a better bet according to the data. CME Group data. Expectations for a second cut by the end of the year have increased to around 55%, about 10 percentage points higher than before the occurrence.
At the heart of Waller's hopes for monetary easing is the belief that inflation will decline further as the year progresses, despite several months of data showing stability in some key prices. The consumer price index slowed to a core reading for December, excluding food and energy, of 3.2%, down 0.1 percentage point from the previous month but still well above the Fed's 2% target.
“At this point, I think inflation will continue to approach our target. “I think the year-to-year rigidity that we saw in 2024 will start to dissipate,” he said. “I may be a bit more optimistic about falling inflation than the rest of my colleagues, and that is what influences my outlook on the policy path.”
At their December meeting, members of the Federal Open Market Committee penciled in two cuts for 2025, though comments after the meeting indicated a cautious and patient approach.
The next FOMC meeting is January 28-29, and markets are pricing in almost no chance of a move.
“Well, January, we'll have to see what happens. … We're really in no rush to act,” Waller said.