US Fed official open to slower rate hike in December, According to Federal Reserve Governor Christopher Waller on Wednesday, recent indications of easing inflation pressures and a slowing US economy may allow the central bank to slow the rate of interest rate increases. In an aggressive effort to contain rising prices this year, the Fed increased its benchmark lending rate six times, including four successive massive increases of 0.75 percentage points.
US Fed official open to slower rate hike in December
However, Waller stated in a speech that encouraging trends in the most recent data “have made me more comfortable considering stepping down to a 50-basis-point hike” in December, although he emphasized that more rate increases are still required to lower inflation. His remarks follow reports that inflation eased in October, with the consumer price index recording its lowest annual pace since January, fueling hopes that skyrocketing prices will begin to decline.
Food and fuel prices have skyrocketed as a result of Russia’s war in Ukraine this year, and the US annual inflation rate hit a painful 9.1 percent in June, its highest level in four decades. Waller stated that the price decline was “widespread,” including a slowdown in service costs and the first decrease in core goods prices since March, which exclude the erratic food and energy markets.
But he cautioned that “one report does not make a trend,” adding that it remains too early to conclude that prices are heading sustainably down. “More interest rate hikes are needed to get inflation down,” he said in the speech prepared for delivery to a conference in Phoenix, Arizona.
– Still ‘significant’ –
Even while inflation is still far higher than the Fed’s two percent target, there are more people calling for smaller changes in the upcoming months. On Monday, Fed Vice Chair Lael Brainard predicted that the US central bank would “appropriately soon” limit the rate of interest rate hikes, but she also acknowledged that more action will be required to combat inflation.
She noted that it will take time for the Fed’s policy moves to flow through to the economy, adding that moving at a more “deliberate” pace would allow officials to assess the data. Fed officials walk a tightrope to try and tamp down prices while avoiding an economic downturn.
The economy has been affected by the central bank’s measures, with the interest-sensitive housing industry slowing the most. Further rate increases are predicted to reduce consumer and business spending, making saving more appealing than spending. Waller added that even if the Federal Open Market Committee, which sets policy, switched to a half-point move at its meeting in December, “this would still be a very significant tightening action,” and the final path will depend on how the economy behaves.
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