2024-09-06 15:09:41
Christopher Waller, governor of the US Federal Reserve, during a Fed Listens event in Washington, DC, US, on Friday, March 22, 2024. A trio of central bank decisions this week sent a clear message to markets that officials are preparing to loosen monetary policy, reigniting investor appetite for risk.
Bloomberg | Bloomberg | Getty Images
Federal Reserve Governor Christopher Waller on Friday backed an interest rate cut at the upcoming central bank policy meeting in less than two weeks, noting the importance of supporting a weakening jobs picture.
“Considering the achieved and continuing progress on inflation and moderation in the labor market, I believe the time has come to lower the target range for the federal funds rate at our upcoming meeting,” Waller said in remarks prepared for the Council on Foreign Relations in New York.
Other policymakers recently have advocated easing policy soon, but this is one of the clearest indications it will happen at the Sept. 17-18 Federal Open Market Committee meeting. Waller repeated verbiage that Fed Chair Jerome Powell used in late August — that the “time has come” for adjustments to monetary policy.
His remarks followed a weaker-than-expected nonfarm payrolls report Friday that added to the belief that the pace of hiring is weakening. The Labor Department reported job growth of 142,000, higher than July but still below the 161,000 Dow Jones forecast.
Waller did not specify how much he thinks the Fed should cut or how frequently. But he said he is open to the possibility that it may need to be aggressive in keeping the labor market afloat as inflation moderates towards the central bank’s 2% goal.
He noted that if the labor market deteriorates more quickly than expected, the Fed should react with larger cuts, which he said would lead to “a greater likelihood of achieving a soft landing.”
“Furthermore, I do not expect this first cut to be the last. With inflation and employment near our longer-run goals and the labor market moderating, it is likely that a series of reductions will be appropriate,” he said.
“Determining the pace of rate cuts and ultimately the total reduction in the policy rate are decisions that lie in the future,” Waller added. He noted that he is “open-minded about the size and pace of cuts” and said, “If the data suggests the need for larger cuts, then I will support that as well.”
Futures market pricing following the report tilted towards a greater likelihood of a quarter percentage point rate reduction this month. But it also indicated more aggressive moves later in the year, with a half-point move in November and possibly another in December, according to the CME Group’s FedWatch measure.
1725635531
#Fed #Governor #Waller #backs #interest #rate #cut #September #meeting
Fed Governor Christopher Waller Backs Interest Rate Cut Amid Weakening Jobs Market
In a recent address to the Council on Foreign Relations in New York, Federal Reserve Governor Christopher Waller voiced his support for an interest rate cut at the upcoming central bank policy meeting, slated for September 17-18. This move is seen as a crucial step in bolstering a weakening jobs market and moderating inflation.
The Case for an Interest Rate Cut
Waller’s remarks come on the heels of a weaker-than-expected nonfarm payrolls report, which showed job growth of 142,000, below the 161,000 forecast by Dow Jones. This report adds to the growing concern that the pace of hiring is slowing down. According to Waller, the “time has come” to lower the target range for the federal funds rate, echoing verbiage used by Fed Chair Jerome Powell in late August.
The Fed governor emphasized the importance of supporting the labor market, which is moderating towards the central bank’s longer-run goals. He is open to the possibility of aggressive rate cuts to keep the labor market afloat, should it deteriorate more quickly than expected. This, he believes, would increase the likelihood of achieving a soft landing.
A Series of Rate Cuts on the Horizon?
Waller did not specify how much he thinks the Fed should cut or how frequently, but indicated that he is open to a series of reductions. He stated, ”Furthermore, I do not expect this first cut to be the last. With inflation and employment near our longer-run goals and the labor market moderating, it is likely that a series of reductions will be appropriate.”
This stance is significant, as it implies that the Fed is prepared to take a more accommodative stance to support the economy. Waller’s comments have been interpreted by futures markets as increasing the likelihood of a rate cut at the upcoming meeting.
Implications for the Economy and Markets
The potential interest rate cut has significant implications for the economy and markets. A rate cut could help to:
Bolster consumer spending and business investment
Support the housing market
Weaken the US dollar, potentially boosting exports
Drive stock prices higher, as lower interest rates make equities more attractive
However, a rate cut also carries risks, including:
Inflationary pressures, should the economy overheat
Asset bubbles, as investors seek higher returns in a low-yield environment
Currency fluctuations, which could impact international trade and investment
The Road Ahead
As the Federal Open Market Committee (FOMC) prepares to meet on September 17-18, markets will be closely watching for signs of a potential interest rate cut. Waller’s comments have added to the expectations of a rate cut, and investors are likely to be weighing the potential implications for their portfolios.
In the coming weeks, market participants will be closely monitoring economic data, including inflation, employment, and GDP growth, to gauge the likelihood of a rate cut. One thing is clear – the Fed’s decision will have far-reaching implications for the economy and markets, and investors would do well to stay informed and adaptable in this fast-changing environment.
Key Takeaways
Federal Reserve Governor Christopher Waller has backed an interest rate cut at the upcoming FOMC meeting
The move is seen as a response to a weakening jobs market and moderating inflation
Waller is open to a series of rate cuts to support the labor market and achieve a soft landing
* The potential rate cut has significant implications for the economy, markets, and investors
As the situation continues to unfold, stay up to date with the latest news and analysis to make informed investment decisions.
