Christoper Waller
This is dovish stuff from Waller, who is the most-hawkish governor. To me, it makes it highly likely we will get a cut this month even if the jobs report is hot.
- One could argue a case for skipping a rate cut in December, will be watching data closely to decide
- Policy is restrictive enough that a Dec cut still allows ample scope to slow pace of cuts later if needed
- Forecasts show inflation on path to 2% in medium term
- Mon pol remains ‘significantly restrictive’
- Still ‘a ways to go’ in reducing rate to neutral
- Speed and timing of cuts to be determined by economic conditions
- when I look at a broader range of labor market data, it tells a fairly consistent
story over the past year about moderating demand relative to supply - recent data on inflation indicate that progress may be stalling
- if policymakers’ estimates of the target range at the end of next year
are close to correct, then the Committee will most likely be skipping
rate cuts multiple times on the way to that destination. - Full text
The Fed blackout kicks off Friday at midnight. These are the final scheduled comments from Waller, who often tips off what Fed policy might be. However it’s Daly who gets the final slot this Friday.
Here is the key passage:
But recent data have raised the possibility that progress on inflation
may be stalling at a level meaningfully above 2 percent. This risk has
raised concerns that the FOMC should consider holding the policy rate
constant at our upcoming meeting to collect more information about the
future path of inflation and the economy. Based on the economic data in
hand today and forecasts that show that inflation will continue on its
downward path to 2 percent over the medium term, at present I lean
toward supporting a cut to the policy rate at our December meeting. But
that decision will depend on whether data that we will receive before
then surprises to the upside and alters my forecast for the path of
inflation.
And this is quite a line as well:
“I feel like an MMA fighter who keeps getting inflation in a choke hold, waiting for it to tap out yet it keeps slipping out of my grasp at the last minute”
Waller cited five specific indicators that could sway him:
- Job Openings and Labor Turnover Survey (JOLTS): December 3 (tomorrow)
- Employment Report: December 6
- Consumer Price Index (CPI): December 11
- Producer Price Index (PPI): December 12
- Retail Sales Data: December 13
“All of that information will help me decide whether to cut or skip. As
of today, I am leaning toward continuing the work we have started in
returning monetary policy to a more neutral setting. Policy is still
restrictive enough that an additional cut at our next meeting will not
dramatically change the stance of monetary policy and allow ample scope
to later slow the pace of rate cuts, if needed, to maintain progress
toward our inflation target”
This lines up nicely with a 70% implied probability of a cut.