Ahead of FOMC, Remarks from the 3 Voting Members This Year
Christopher Waller, a Federal Reserve (Fed) Board member nominated during former U.S. President Donald Trump's first term, has indicated a leaning towards supporting a rate cut in December. Meanwhile, John Williams, President of the New York Federal Reserve Bank and the third-ranking Fed official, and Raphael Bostic, President of the Atlanta Federal Reserve Bank, suggested that additional cuts may be necessary in the coming months but showed caution regarding any immediate policy decisions this month.
According to Bloomberg and other sources, Waller stated on the 2nd (local time) at a conference in Washington, "Based on economic indicators, inflation appears to be continuing to slow toward the 2% price stability target over the medium term," adding, "At this point, I am leaning toward supporting a rate cut at the December meeting." Waller, classified as a moderate hawk (favoring monetary tightening) within the Fed, holds voting rights on interest rate decisions at the Federal Open Market Committee (FOMC) regular meetings.
Waller added a caveat that his decision could change if newly released data before this month's meeting surpasses expectations and alters his existing inflation forecast, but he assessed that "there is strong evidence that monetary policy remains quite restrictive." He further noted, "Another factor supporting additional rate cuts is that the labor market appears to have finally reached equilibrium." Ahead of the FOMC meeting scheduled for December 17-18, the U.S. Department of Labor is set to release the nonfarm payroll report this week.
Similarly, Williams and Bostic, who also have voting rights at this year's FOMC meetings, avoided direct comments on the December policy decision on the same day. Attending an event in New York, Williams said, "Additional rate cuts will be needed over time," but added, "The path of policy depends on the data. What we have learned over the past five years is that the outlook remains very uncertain."
These remarks align with the 'gradual cuts' message confirmed in the recently released November FOMC minutes. Bostic also confirmed in a Bloomberg TV interview that "rates will need to be lowered in the coming months," but he has not made a decision regarding a cut this month. When asked if he supports a December cut, he responded that he would "keep options open," reflecting a cautious stance.
The market currently favors the possibility of a rate cut this month. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of this day, the federal funds futures market reflects more than a 74% probability that the Fed will cut the current 4.50-4.75% rate by 0.25 percentage points at the December FOMC meeting. The probability of holding rates steady is in the 25% range. Just a week ago, the outlook was balanced between holding steady and a small cut (a 0.25 percentage point reduction), but additional indicators suggesting manufacturing contraction have shifted the weight toward a small cut.
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