WASHINGTON: The US Federal Reserve should be more careful with its pace of rate cuts than it was in September, a senior bank official said Monday, pointing to “disappointing” recent inflation data.
The US central bank kicked off its rate-cutting cycle last month with a large cut of half a percentage-point, noting the progress made in bringing inflation down toward its long-run target of two percent.
But the data published in the three weeks since the rate decision was announced have been “uneven,” Fed governor Christopher Waller told a conference in California, according to prepared remarks.
US Fed set to make first rate cut since 2020
He called the latest inflation figures “disappointing.”
A Labor Department report last week showed US consumer inflation cooled in the year to September, but a measure stripping out volatile food and energy costs rose slightly.
Monthly headline inflation also rose by 0.2 percent, while core inflation also exceeded forecasts to increase by 0.3 percent.
Economic growth and employment have meanwhile remained strong despite the Fed’s elevated interest rates.
“This data is signaling that the economy may not be slowing as much as desired,” he said.
“While we do not want to overreact to this data or look through it, I view the totality of the data as saying monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting,” he added.
Waller’s comments suggest he supports a more moderate pace of cuts going forward, making it less likely he would back another large rate cut like the one seen last month.
At their September rate decision, policymakers penciled in a total of 50 basis points of cuts over the two remaining rate decisions this year, suggesting either one more large cut, or two smaller cuts of a quarter percentage-point.
Futures traders see a roughly 80 percent chance of a smaller rate cut at the next meeting in November, and a probability of just under a 20 percent that the Fed will keep rates where they are, according to data from CME Group.