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A top Federal Reserve official has said “disappointing” inflation data means the US central bank should “push back” the timing of interest rate cuts.
Christopher Waller, a Fed governor and one of the most influential US rate-setters, said in a speech on Wednesday: “We made a lot of headway in reducing inflation in the past year or so, although the readings in the past two months have been disappointing.”
He added “shorter-term inflation measures are now telling me that progress has slowed and may have stalled”.
It was, he said, “appropriate to reduce the overall number of rate cuts or push them further into the future” in response to the latest inflation figures. In February both the headline consumer price index and core CPI, which strips out more volatile food and energy costs, rose 0.4 per cent from the prior month.
Those reading were “obviously not progress toward our inflation goal”, which is 2 per cent inflation per year, he added.
Waller did not detail whether he was referring to the overall number of cuts for 2024, or for the Fed’s entire forecast horizon, which covers from now until 2026.
On timing, he said “in the absence of an unexpected and material deterioration in the economy”, he would need to see “at least a couple months of better inflation data” before he had enough confidence that inflation could sustainably hit the 2 per cent goal.
A slim minority of nine Federal Open Market Committee officials favour making three cuts this year, according to projections issued last week. Their bets are broadly in line with those of market participants.
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