According to a senior bank official on Thursday, assuming inflation data cooperates, the US Federal Reserve may lower interest rates three or four times this year, with the first cut potentially occurring before July.
The headline According to data released Wednesday, consumer inflation increased for a third consecutive month in December due to a spike in energy prices. However, a closely monitored indicator decreased somewhat, suggesting underlying inflation may be slowing.
Fed governor Christopher Waller told CNBC, “The inflation we got yesterday was excellent.” He added that underlying price pressures that do not include volatile food and energy prices have been close to target every month. To support the job market, the US central bank has been lowering interest rates in recent months by a whole percentage point since September. Only two rate cuts were planned for this year after Fed policymakers opted to lower rates by a quarter percentage point to between 4.25 and 4.50 at their most recent rate decision in December.
Depending on the statistics, Waller, a permanent voting member of the Fed’s rate-setting committee, told CNBC that he might favour cutting rates up to four times this year. I may be a little more optimistic about inflation coming down than the rest of my colleagues,” he said, adding that the Fed might only be making cuts once or twice this year if the data didn’t “cooperate.” When asked about the timing of rate cuts, Waller responded that it was “reasonable” to believe that rate cuts would occur if the data arrived as he had anticipated.
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