WASHINGTON: The US Federal Reserve is “within striking distance” of reaching its long-term inflation target, and could begin cutting interest rates this year, a senior official said Tuesday.
“I am becoming more confident that we are within striking distance of achieving a sustainable level of two percent PCE inflation,” Fed Governor Christopher Waller told a conference in Washington in prepared remarks, referring to the Fed’s favored inflation gauge.
He added that recent data has made him more certain than he has been since 2021 that inflation is on the right path.
US Fed official changes tune to back prolonged pause
Members of the Fed’s rate-setting Federal Open Market Committee (FOMC) recently voted to hold interest rates at a 22-year high, and penciled in up to three rate cuts for this year, citing progress against inflation.
The personal consumption expenditures (PCE) price index – the Fed’s favored inflation measure – fell to an annual rate of 2.6 percent in November, while economic growth and job creation have shown some recent signs of slowing.
“I believe policy is set properly,” Waller said. “It is restrictive and should continue to put downward pressure on demand to allow us to continue to see moderate inflation readings.”
“As long as inflation doesn’t rebound and stay elevated, I believe the FOMC will be able to lower the target range for the federal funds rate this year,” he continued.
He added that, when the time comes to start cutting, interest rates “can and should be lowered methodically and carefully,” in a less rapid way than the Fed has done in the past.
Futures traders have assigned a 100 percent probability that the Fed will vote to hold interest rates steady later this month, according to CME Group data.
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