Federal Reserve Governor Christopher Waller suggested Monday that future interest rate cuts would be more gradual, as signs point to the economy running hotter than expected.
Waller, speaking at a Stanford University conference, pointed to recent data on jobs, inflation, GDP, and income.
He indicated that “the data is signaling that the economy may not be slowing as much as desired,” urging caution on future rate reductions.
In September, the Federal Open Market Committee made the unusual decision to cut the benchmark rate by 50 basis points, lowering it to a target range of 4.75% to 5.00%.
Traditionally, the Fed has preferred smaller, 25 basis point moves, only using larger cuts during times of crisis.
While more rate cuts are expected—potentially another half-point by year’s end and a full percentage point in 2025—Waller did not commit to specific timing.
He noted, “Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year.”
Economic data has been mixed lately.
Job growth strengthened in September after a weak summer, inflation came in slightly higher than anticipated, and GDP has remained robust.
In the final revision, the Commerce Department raised its estimate for second-quarter gross domestic income to 3.4%, and the savings rate was revised upward to 5.2%.
“These revisions suggest that the economy is much stronger than previously thought, with little indication of a major slowdown in economic activity,” Waller said.
This strength leaves business leaders and policymakers balancing the need for caution in lowering rates with concerns about overheating.
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