Regarding last week’s US inflation data not showing acceleration, Federal Reserve Board Governor Christopher Waller said that it seems unnecessary to further raise interest rates at the moment. However, he remains cautious about cutting rates and needs to observe more data to confirm that inflation is indeed moving towards the target.
Last week in the United States, the released data showed that the year-on-year CPI in April increased by 3.4%, which met market expectations and was the first time since January this year that the year-on-year increase had slowed down. The year-on-year increase in core CPI also fell to 3.6%, the smallest increase since April 2021. This inflation data reignited hopes in the market for the Fed to cut interest rates this year, causing both the stock market and Bitcoin to rise simultaneously.
Regarding this non-accelerated inflation data, Federal Reserve Board Governor Christopher Waller stated in a speech at the Peterson Institute for International Economics in Washington on Tuesday that it supports the position that there is no need to further raise interest rates. He stated that from a series of recent data, such as the slowdown in retail sales and the cooling down of manufacturing and service industries, it is evident that the Fed’s interest rate hikes help alleviate some demand and exert downward pressure on inflation. Regarding the labor market, he added:
Nevertheless, Waller remains reserved about cutting rates and emphasizes:
Despite the slight decline in CPI in April compared to the same period last year, Waller believes that this progress is very limited and does not change his view that more evidence of inflation slowdown is needed before supporting any loose monetary policy.
It is understood that Waller’s views have attracted attention because of an article by Nick Timiraos, a journalist from The Wall Street Journal, who referred to him as the “Fed megaphone.” In the article published in February, Timiraos pointed out that Waller has become one of the most watched officials in the Federal Reserve, and some analysts believe that if Trump is elected, Waller may be the next Fed chairman.
Federal Reserve officials who share the same views as Waller include Loretta Mester, President of the Federal Reserve Bank of Cleveland, and Susan Collins, President of the Federal Reserve Bank of Boston. They both believe that while waiting for more evidence to prove that inflation is decreasing, it is necessary to remain patient, which strengthens the signal of long-term interest rate hikes.
According to Bloomberg, Mester stated yesterday that she hopes to see a continuous downward trend in inflation data in the coming months before considering cutting rates. On Monday, she also adjusted her previous expectation of three rate cuts this year, stating that it is no longer appropriate given the stronger-than-expected first-quarter inflation data.
Similarly, Collins also stated that she wants to see more evidence that price pressures are moving towards the central bank’s 2% target. She stated:
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