Fed Governor Waller Signaled a Possible December Rate Cut Amid Inflation Concerns

On Monday, December 2, Federal Reserve Governor Christopher Waller expressed optimism about a potential interest rate cut in December, though he remains wary of inflationary tendency. Waller stated that he supported a rate reduction this December due to data-dependent forecasts that inflation would decline to the Fed’s 2% target over the medium term.

 

However, Waller warned that any unexpected inflation spikes resulting from incoming data could change his positive outlook. Recent trends have backed his warning, with October’s personal consumption expenditures (PCE) price index—a key Fed inflation indicator—presenting an annual increase to 2.3% in headline inflation and 2.8% in core prices. These figures marked an uptrend from the previous month, underscoring the challenges the Fed faces in achieving its inflation goal.

 

Markets anticipate another 0.25% rate cut from the Fed at its meeting on December 17-18 following the 0.25% reduction in November. Waller noted that the Fed adjusted rates based on data to drive monetary policy toward neutrality. Thus, Waller highlighted data of the job openings released at 11 pm today (Dec. 3) and the nonfarm payrolls reported on Friday, Dec. 6, by the Bureau of Labor Statistics.

 

Waller concluded his statement with the belief that continued rate easing was appropriate despite slowing inflation. Also on Monday, New York Fed President John Williams expressed confidence in lower inflation and said the Fed's monetary policy, including rate adjustments, would become more “neutral” over time.

 

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