US Fed's Waller: "If Inflation Slows, 3-4 Rate Cuts This Year"

Christopher Waller, a moderate hawk (favoring monetary tightening) within the U.S. Federal Reserve (Fed), stated on the 16th (local time) that if the inflation slowdown continues as expected, it is possible to have 3 to 4 interest rate cuts this year.

In an interview with CNBC on the same day, Waller said, "If inflation indicators come out well or continue on an improving path, I am confident that interest rate cuts will happen faster than the market expects."

Reuters Yonhap News

He added, "Everything will be determined by the data," but also said, "If significant progress is made in slowing inflation, more can be done." He projected that assuming a 0.25% cut, there could be 3 to 4 cuts, but added, "If the data does not cooperate, it could be reduced to 2 or even 1."

He also stated, "At this point, I believe inflation will approach the target. The stickiness of annual inflation observed in 2024 is expected to gradually disappear."

Waller did not rule out the possibility of a rate cut in March. However, he forecasted that the likelihood of a rate cut at the FOMC meeting on the 28th-29th is low.

Recent observations suggest that the slowdown in U.S. inflation has stalled, making additional rate cuts within the year practically difficult. However, Waller stated on the 9th that he expects inflation to continue slowing and that additional rate cuts would be appropriate.

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day reflects a 97.3% probability that the Fed will keep rates unchanged at the Federal Open Market Committee (FOMC) meeting on the 28th-29th. The probabilities of rate holds in March and May are 70.1% and 52.1%, respectively.