Federal Reserve Governor Christopher Waller said he is inclined to vote in favor of another cut in interest rates when officials meet later this month, although earlier data could give him reason to hold steady.
“Today I support a policy rate cut at our December meeting,” Waller said during a speech on the Fed’s framework review in Washington, sponsored by the American Institute for Economic Research. “But that decision will depend on whether the data we get until then surprises the upside and changes my outlook for the path of inflation.”
Waller said the latest data raised concerns that inflation may be stuck above the 2% target, but added that there is “no indication” that prices for key services should remain at current levels or increase.
“I think the evidence is strong that policy remains significantly restrictive and further cuts mean we are not hitting the brake pedal as hard,” Waller said in the text of his remarks. “Another factor supporting further rate cuts is that the labor market finally appears to be balanced, and we should aim to keep it that way.”
Waller did not discuss the frame revision in the text of his remarks.
Fed officials began cutting rates in September after pushing them to a peak of 5.5% from 5.25%, which helped cool inflationary pressures to a peak of 7.2% in mid-2022.
But investors in December futures contracts have a chance to price a break in the cutting cycle after the latest data showed sticky service sector inflation. The price index for personal consumption expenditures, excluding food and energy, rose 2.8% for the 12 months ending in October.
While officials call their policy “restrictive,” the U.S. gross domestic product spread out at an annual rate of 2.8% in the last quarter. Personal expenses have remained strong along with company equipment spending.
Chairman Jerome Powell has been alert to the risk of a weakening labor market, but getting a clear reading of the data has been difficult due to strikes and storms. The Bureau of Labor Statistics will release its November payrolls report on Friday. The next meeting of the Federal Open Market Committee will be held on December 17-18 in Washington.
