FRB Director Waller says interest rates can be cut by the end of the year - inflation must be rekindled

・It is necessary to proceed with interest rate cuts at an orderly and careful pace - Director Waller

・ “I don't see any reason to cut interest rates as quickly or as quickly as before”

・Mr. Waller, who spoke at an online event hosted by the Brookings Institution, said, “I think the Federal Open Market Committee (FOMC) will be able to lower the federal fund (FF) interest rate guidance target range by the end of the year unless inflation is rekindled and remains at a high level.”

・ He said, “If the right time comes to begin lowering interest rates, it is possible and should be done in an orderly manner to reduce them carefully.”

・He explained that “economic activity and the labor market are in good condition, the inflation rate is gradually slowing down to 2%, and there is no reason to cut interest rates as quickly or as quickly as before,” citing past economic shocks that led to rapid pace of interest rate cuts.

・In response to these statements, US bond yields soared. Traders have retreated both the probability that interest rate cuts will be implemented in March and the forecast for interest rate cuts this year.

・Mr. Waller stated that the start of interest rate cuts and the extent of interest rate cuts “depend on data to be announced in the future.”

・Mr. Michael Geppen of Bank of America (BoFA) stated in the report that Mr. Waller's statement, even if it suggests the idea that an early start of interest rate cuts is desirable, it is not “firm support” for the March interest rate cut, and expressed the view that what is important is the part relating to the pace of mitigation.

・The Goldman Sachs economist also analyzed Mr. Waller's lecture, saying, “The initial rate cut is slightly off our March forecast, increasing the risk that the pace of the cuts may be on a quarterly basis from the beginning.”