Fed Governor Waller sees central bank 'getting closer' to an interest rate cut

cnbc.com:

Federal Reserve Governor Christopher Waller on Wednesday suggested that interest rate cuts are ahead soon as long as there are no major surprises on inflation and employment.

«I believe current data are consistent with achieving a soft landing, and I will be looking for data over the next couple months to buttress this view,» Waller said in remarks for a program at the Kansas City Fed. «So, while I don't believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.»

Keeping with statements from other policymakers, Waller's sentiments point to an unlikelihood of a rate cut when the Federal Open Market Committee meets later this month, but a stronger likelihood of a move in September.

Central bankers have become more optimistic from data in recent months that has shown inflation easing after a surprisingly higher move for the first three months in 2024.

Waller outlined three potential scenarios in the days ahead: One, in which the inflation data turns even more positive and justifies a rate cut in «the not too distant future»; a second in which the data fluctuates but still points toward moderation; and a third in which inflation turns higher and forces the Fed into a tighter policy stance.

Of the three, he considers the third scenario of unexpectedly stronger inflation as the least likely.

«Given that I believe the first two scenarios have the highest probability of occurring, I believe the time to lower the policy rate is drawing closer,» Waller said.

Waller's comments on Wednesday are of particular note because he has been among the more hawkish FOMC members this year, or those who have advocated for tighter monetary policy as fears escalated