2024-01-16 17:56:01
WASHINGTON (AP) — A top Federal Reserve official said Tuesday that he is confident that inflation will continue to decline this year toward the 2% target, after two years of price increases that hurt millions of Americans.
Christopher Waller, a member of the US central bank’s board of governors, said inflation is declining even as growth and hiring remain strong, a situation he called “about as good as it gets.”
Waller’s comments follow those of other Fed officials who said the institution is on track to begin reducing its short-term interest rate this year. In December, bank officials predicted they would cut rates three times this year. Investors on Wall Street and many economists suspect the first reduction will come in March.
“The progress I have seen in the fight against inflation, combined with the available data on economic and financial conditions and my assessment, has made me more confident than I have been since 2021 that inflation is on track for 2%” Waller said in written comments to the Brookings Institution.
Consumer inflation, by the Fed’s preferred measure, rose to 7% in mid-2022 compared to a year earlier. The central bank responded by raising interest rates 11 times since March 2022, to their highest level in 22 years. Annualized inflation fell to 2.6% in November, as measured by the Fed.
Waller suggested that the economy continues to grow at a measured pace, with unemployment at 3.7%, just above its half-century low, while inflation is easing.
“Will this last?” he asked. “In the end, I feel confident that the economy can continue on its current trajectory.”
Waller avoided giving a timeline for possible interest rate reductions. He said the timing and magnitude of the reductions will depend on inflation and other economic data.
Additionally, he noted a shift in the Fed’s approach, from one focused on fighting inflation to a more balanced one. The central bank, he indicated, now has to strive not only to keep inflation low but also to keep unemployment low. That change suggests the Fed could cut rates quickly if the economy or hiring slows in the coming months.
“Today, I consider that the risks to our employment and inflation goals are closely balanced,” he said.
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