Federal Reserve President Christopher Waller said Thursday that the central bank could cut interest rates multiple times this year if inflation eases as expected.
The policymaker said in an interview with CNBC that the first rate cut could occur in the first half of this year, with other rate cuts likely to follow as long as economic indicators on prices and unemployment are consistent.
“As long as the inflation indicators do well or continue on that trajectory, we’ll probably see rate cuts sooner than the market is pricing in,” Waller said in an interview with Sarah Eisen on Squawk on the Street. I’m sure it will be done,” he said.
Asked how many would be needed, he said: “It all depends on the data. So if we make significant progress, we could do more.” He assumed a quarter. He said there could be three or four. Increase in points.
“If the data doesn’t match up, and inflation worsens significantly, we’ll see it go back to double, or even back to 1,” he said.
Waller’s comments prompted traders to bet on a more aggressive pace of rate cuts. The market’s odds of a May move have risen to about 50%, according to CME Group data, but June appears to be a better bet. Expectations for a second cut by the end of the year rose to about 55%, about 10 percentage points higher than before his remarks.
At the heart of Waller’s easing expectations is his belief that inflation will ease further as the year progresses, despite data in recent months showing some resilience in key prices. The consumer price index (core value excluding food and energy) slowed to 3.2% in December, down 0.1 percentage point from the previous month, but was still well above the Fed’s 2% target.
“At this point, I think inflation will continue to rise towards target. On a year-on-year basis, I think the stickiness we saw in 2024 will start to disappear.” “So I may be a little more optimistic about lower inflation than some of my colleagues. That’s what’s driving my outlook on the policy path.”
At their December meeting, members of the Federal Open Market Committee approved two rate cuts for 2025, but post-meeting commentary suggested a cautious and patient approach.
The next FOMC meeting will be held on January 28-29, and markets are pricing in little potential for movement.
“Well, we’ll have to wait and see what happens in January. … We’re not really going to rush into anything,” Waller said.
