Regarding last week’s US inflation data, Federal Reserve Board Governor Christopher Waller stated that it does not seem necessary to further raise interest rates at the moment. However, he remains cautious about lowering rates and believes that more data needs to be observed to confirm that inflation is indeed moving towards the target.
Last week, data showed that the year-on-year increase in April’s Consumer Price Index (CPI) was 3.4%, in line with market expectations. This is the first time since January of this year that the year-on-year increase has slowed down. The year-on-year increase in core CPI also fell to 3.6%, the smallest increase since April 2021. This inflation data has reignited hopes in the market for a Fed rate cut, and at the time of the data release, both the US stock market and Bitcoin surged.
In his speech at the Peterson Institute for International Economics in Washington on Tuesday, Waller expressed his support for not needing to further raise interest rates in light of the lack of acceleration in inflation. He pointed out that recent data, including the slowdown in retail sales and cooling in manufacturing and services industries, suggests that the Fed’s interest rate hikes help alleviate some of the demand and downward pressure on inflation. Regarding the labor market, he added that:
“Although the year-on-year CPI in April slightly decreased compared to the same period last year, Waller believes that this progress is very limited and does not change his view that more evidence of inflation slowdown is needed before supporting any loose monetary policy.”
It is worth noting that Waller’s views have attracted attention because of an article by Nick Timiraos, a reporter for The Wall Street Journal, who called him the “Fed megaphone” in February. Some analysts believe that if Trump is elected, Waller may be the next chairman of the Federal Reserve.
Other Federal Reserve officials who share the same view as Waller include Loretta Mester, President of the Federal Reserve Bank of Cleveland, and Susan Collins, President of the Federal Reserve Bank of Boston. They both believe that while waiting for more evidence to prove that inflation is declining, the central bank needs to be patient, which reinforces the signal of long-term interest rate hikes.
According to Bloomberg, Mester stated yesterday that she hopes to see a continued downward trend in inflation data in the coming months before considering a rate cut. On Monday, she also adjusted her previous expectation of three rate cuts this year, stating that it is no longer appropriate given the stronger-than-expected inflation data in the first quarter.
Similarly, Collins also stated that she wants to see more evidence that price pressures are moving towards the central bank’s 2% target. She stated:
“Related Reports:
Will the market always rise when the Federal Reserve lowers interest rates? Historical data tells you not to be too naive.
Serious differences of opinion on “rate cuts this year” at the Federal Reserve! Some officials call for “conditional rate hikes” to curb inflation.
Rate cuts rekindle: Initial jobless claims in the US reach an 8-month high of 231,000, Bitcoin surpasses $63,000, and Ethereum surpasses $3,000.”