Stay informed with free updates
Simply sign up to the US interest rates myFT Digest — delivered directly to your inbox.
A senior Federal Reserve official stated that a strong US economy and mixed inflation data support a more cautious approach to interest rate cuts following a recent decrease by the central bank. Governor Christopher Waller emphasized the need for prudence in monetary policy decisions during a speech at the Hoover Institution at Stanford University. He described the current state of the US economy as a “sweet spot” and highlighted the importance of maintaining it.
The Federal Reserve had previously reduced its benchmark interest rate, citing factors such as declining inflation and slower job growth. However, recent data challenges this narrative, with unexpected increases in the consumer price index and strong job reports. Waller acknowledged the uneven progress in inflation and emphasized the need to avoid a major economic slowdown.
As a key member of the Federal Open Market Committee, Waller’s views on interest rates carry weight. He expressed optimism about the economy’s future trajectory and the possibility of reaching a neutral policy setting that promotes growth. His stance aligns with other Fed officials, such as John Williams, who support gradual interest rate reductions to achieve a neutral level over time.
Neel Kashkari of the Minneapolis Fed also advocated for modest rate cuts based on data analysis. However, uncertainties remain due to external factors like recent hurricanes and strikes affecting employment figures. Despite these challenges, Waller remains confident in the Fed’s ability to manage inflation and sustain a healthy labor market without facing an imminent recession.