Fed Governor Waller says progress toward 2% inflation ‘likely resumed’

In a speech at the Peterson Institute for International Economics, Fed Board of Governors member and a 2024 FOMC voting member Christopher Waller stated: “After a run of great data in the latter half of 2023, it seemed that significant progress on inflation would continue and that rate cuts were not far off. However, the first three months of 2024 threw cold water on that outlook, as data on both inflation and economic activity came in much hotter than anticipated. Initially it seemed like the bad data might be simply a “bump” in the road, but as the data continued to point in the wrong direction, the narrative quickly turned towards concerns that the economy was not cooling as needed to keep inflation moving down toward the Federal Open Market Committee’s (FOMC) 2 percent goal. Progress on inflation appeared to have stalled and there were fears that it might even be accelerating. Suddenly, the public debate became whether monetary policy was restrictive enough and if rate hikes should be back on the table. But more recent data on the economy indicate that restrictive monetary policy is helping to cool off aggregate demand and the inflation data for April suggests that progress toward 2 percent has likely resumed. Central bankers should never say never, but the data suggests that inflation isn’t accelerating, and I believe that further increases in the policy rate are probably unnecessary.”