Fed Governor Waller suggests multiple interest rate cuts could happen in 2025 if inflation trends downward as expected
In a chat on CNBC, he hinted that the first cut could happen in the first half of the year, depending on how the economy performs. Waller said, “If the data comes in good on inflation, then I can see rate cuts happening sooner than expected.”
When asked how many cuts we might see, he said it all depends on the data. If things go well, we could be looking at three or four cuts. But if inflation stays stubborn, we might only see one or two.
After his comments, traders started betting on a quicker pace of cuts. The odds for a May cut jumped to about 50%, with June looking like a safer bet.
Waller believes inflation will continue to drop this year, even though some prices have been sticky. He pointed out that the consumer price index showed a 3.2% core reading for December, which is still above the Fed’s 2% target.
He’s a bit more optimistic about inflation easing than some of his colleagues, which shapes his outlook on policy changes. At the last meeting, the Federal Open Market Committee planned for two cuts in 2025, but they’re taking a cautious approach.
The FOMC will meet again on January 28-29, but Waller mentioned there’s no rush to make any moves just yet.
