Federal Reserve Governor Christopher Waller believes investors need to temper their expectations about how soon the central bank will begin implementing rate hikes this year.
At a speech in Washington DC, Waller said that while the Fed is likely to lower rates in 2024, it might not happen in the short term. At the last FOMC meeting in December, the Fed’s dot plot indicated three rate cuts were likely in 2024.
“When the time is right to begin lowering rates, I believe it can and should be lowered e methodically and carefully,” Waller told attendees at the Brookings Institution. “In many previous cycles ... the [Federal Open Market Committee] cut rates reactively and did so quickly and often by large amounts.”
“I see no reason to move as quickly or cut as rapidly as in the past,” he added.
Traders don’t seem to share his view, as the three major indexes each turned south following his remarks.
Waller did acknowledge that progress has been made on inflation, even as it remains above the Fed’s target of 2%.
“For a macroeconomist, this is almost as good as it gets. But will it last?” Waller said. “Time will tell whether inflation can be sustained on its recent path and allow us to conclude that we have achieved the FOMC’s price-stability goal. Time will tell if this can happen while the labor market still performs above expectations.”
Regarding the 2%, Waller said he believes the Fed is “within striking distance.”