Federal Reserve Governor Christopher Waller said Thursday that the central bank could cut interest rates several times this year if inflation eases as he expects.
In an interview with CNBC, the policymaker said he expects the first cut could come in the first half of the year, with others to follow as long as economic data on prices and unemployment align.
“As long as the data is good on inflation or continues that way, I can certainly see rate cuts happening before maybe pricing the market,” Waller said during the “A squawk in the street” interview with Sara Eisen.
Asked how much that might mean, he said, “It’s all going to be data-driven. I mean, if we make a lot of progress, you could do more,” which he said could mean three or four, assuming quarter-percentage-point growth.
“If the data doesn’t cooperate, then you’re going to go back to two, maybe even one, if we just get a lot of sticky inflation,” he said.
Traders increased their bets on a slightly more aggressive pace of rate cuts after Waller’s remarks. Market-implied odds for a move in May rose to around 50%, although June appeared to be a better bet, according to CME Group data. Expectations for a second cut by the end of the year have risen to about 55%, or about 10 percentage points higher than before he spoke.
At the heart of Waller’s hopes for an easing is the belief that inflation will fall further as the year goes on, despite months of data showing volatility in some key prices. The consumer price index slowed to a core reading of 3.2%, excluding food and energy, for December, down 0.1 percentage point from the previous month, though still well above the Fed’s 2% target.
“Right now I think inflation will continue to move closer to our target. I think the year-over-year decline that we saw in 2024 will start to disappear,” he said. “So I’m perhaps a little bit more optimistic about falling inflation than the rest of my peers, and that’s what drives my outlook for policy direction.”
At a meeting in December, members of the Federal Open Market Committee outlined two parts for 2025, although comments after the meeting suggested a cautious and patient approach.
The FOMC next meets on January 28-29, and prices in the markets have almost no chance of movement.
“Well, January, we kind of have to see what happens … We’re really in no rush to do things,” Waller said.
