Federal Reserve Gov. Christopher Waller said significant progress has been made to bring inflation down to its 2 percent long-term target but isn’t committing to a firm date to begin reducing interest rates.
Speaking Nov. 28, Waller said retail sales slightly fell last month and spending was down on the interest-sensitive motor vehicle sector. Unemployment remains low but has increased to 3.9 percent from 3.4 percent in April. Core PCE inflation is moderating as real GDP grew at a nearly 5 percent pace in the third quarter. The increase in average hourly earnings has fallen to an annualized rate of 3.2 percent over the past three months, down from the 4.1 percent 12-month rate.
Waller, who indicated that the FOMC will not raise interest rates at its next meeting Dec. 12-13, said the job market remains tight on a historical basis. Job creation is still occurring at a higher rate than required to account for new entrants to the labor force, and unemployment remains comparable to the strong job market of the late 1990s.
“While I am encouraged by the early signs of moderating economic activity in the fourth quarter based on the data in hand, inflation is still too high, and it is too early to say whether the slowing we are seeing will be sustained,” he added.
Waller’s comments came after the FOMC held its benchmark federal funds rate at between 5.25 percent and 5.50 percent following its Oct. 31-Nov. 1 meeting. Inflation fell to 3.2 percent in October, a sharp drop from 9.1 percent in June 2022, which Waller attributed to the FOMC’s rapid interest rate hikes.
“I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent,” Waller said. “That said, there is still significant uncertainty about the pace of future activity, and so I cannot say for sure whether the FOMC has done enough to achieve price stability.”
Speaking Nov. 28 during a Utah Bankers Association event in Salt Lake City, Federal Reserve Gov. Michelle Bowman said she expects the FOMC to raise interest rates at least one more time. “My baseline economic outlook continues to expect that we will need to increase the federal funds rate further to keep policy sufficiently restrictive to bring inflation down to our 2 percent target in a timely way,” she added. “However, monetary policy is not on a preset course, and I will continue to closely watch the incoming data as I assess the implications for the economic outlook and the appropriate path of monetary policy.”
According to Reuters, Chicago Federal Reserve Bank President Austan Goolsbee described overall inflation as falling at a pace not seen since the 1950s. “Food price inflation has been well above levels comfortable for average Americans,” he said Nov. 28 in welcoming remarks at the bank’s annual agricultural outlook conference. “But overall we have made progress on inflation outside of the food sector; it’s been coming down, it’s not yet down to target but 2023 we’re on path to set the highest drop in the inflation rate in 71 years.”
