With Fed likely done hiking rates, Waller flags pivot ahead
By Howard Schneider and Ann Saphir
WASHINGTON (Reuters) -Federal Reserve policymakers look increasingly comfortable closing out the year with interest rates on hold and the clock ticking on the timing of the U.S. central bank's first cut as they try to engineer a «soft landing» for the economy.
«Inflation rates are moving along pretty much like I thought,» Fed Governor Christopher Waller, a hawkish and influential voice at the central bank, told the American Enterprise Institute think tank on Tuesday.
«I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%,» he said, and also «reasonably confident» of doing so without a sharp rise in the unemployment rate, now at 3.9%.
If the decline in inflation continues «for several more months… three months, four months, five months… we could start lowering the policy rate just because inflation is lower,» he said. «It has nothing to do with trying to save the economy. It is consistent with every policy rule. There is no reason to say we will keep it really high.»
Additional Fed rate increases remain a possibility if upcoming data includes an unexpected resurgence of price pressures, he said. And an unforeseen shock could «blow up» the soft-landing scenario, he said.
His remarks overall laid out why he feels rates probably won't need to move higher and may well be heading down next year. Bond yields fell after the comments, and investors moved to price a bigger chance of rate cuts starting in May and dropping more than a full percentage point in 2024.
The Fed held its benchmark overnight interest rate steady in the 5.25%-5.50% range at the end of its Oct. 31-Nov. 1 policy meeting, and analysts overwhelmingly expect the
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