A top Fed official leans toward December rate cut but says it depends on economic data
WASHINGTON — A top Federal Reserve official said Monday that he is leaning toward supporting a rate cut when the Fed meets in two weeks, but that evidence of persistent inflation before then could cause him to change his view.
Speaking at George Washington University, Christopher Waller, a key member of the Fed’s Board of Governors, said he is confident inflation will fall and the central bank will likely continue to cut its policy rate, which will have consequences for many consumer and business loans.
But he noted that there is a risk that inflation “sticks above the Fed’s 2% target,” which would support an argument for keeping the Fed’s rate unchanged this month.
“Currently, I am leaning toward supporting a cut in the policy rate at our December meeting,” Waller said in remarks at a conference held by the American Institute for Economic Research. “But that decision will depend on whether the data we receive before then surprises the upside and changes my forecast for the path of inflation.”
Waller’s caution reflects a remarkable shift in the economic and inflation outlook over the past month or so. Growth in consumer spending and the broader economy was robust in the July-September quarter. Moreover, inflation picked up in October after slowing for most of this year.
And Donald Trump’s election victory has raised the prospect of widespread tariffs and mass deportations of migrants, both of which could increase inflation. Some economists say they think the Fed could decide to cut rates more slowly to allow time to evaluate the effects of Trump’s policies.
With inflation steadily declining from its 2021 peak, the Fed cut its policy rate by half a point in September and by a quarter point in November. And in September, the company said it expected to announce another quarter-point cut this month. Still, inflation has remained above the Fed’s target level, clouding the Fed’s next move.
Waller emphasized that if future economic reports show inflation or growth deviates from the Fed’s expected path, he could choose to leave rates unchanged this month.
“If the data we receive between today and the next meeting surprises in a way that indicates our predictions of slowing inflation and a moderating but still solid economy are wrong, then I will support keeping the policy rate constant ” he said.