Fed Board Governor Waller says rate cut possible by end of year if inflation does not reignite

It is necessary to proceed with rate cuts in an orderly and cautious manner - Governor Waller

"I see no reason to rush or quickly lower interest rates as before"

Speaking at an online event hosted by the Brookings Institution, Mr. Waller said, "I believe that if inflation does not reignite and remains at a moderate level, the Federal Open Market Committee (FOMC) could lower the Federal Fund (FF) target range within the year."

He stated, "When the appropriate time comes to start lowering interest rates, it is possible to do so in an orderly and cautious manner, and that is what should be done."

He explained, referring to past economic shocks resulting from rapid interest rate cuts, that "economic activity and the labor market are in good condition, the inflation rate is gradually slowing down towards 2%, and there seems to be no reason to hurry or cut rates quickly as before."

In response to these statements, U.S. bond yields sharply rose. Traders pushed back the probability of a rate cut in March and the outlook for the magnitude of rate cuts this year.

Waller stated that the timing and magnitude of rate cuts will depend on data to be announced in the future.

Michael Gapen of Bank of America (BofA) suggested in a report that although he implies an early start to rate cuts would be desirable, it does not represent "strong support" for a rate cut in March, emphasizing the importance of the pace of easing.

Economists at Goldman Sachs also analyzed Waller's remarks, stating that the first rate cut may be slightly delayed from our March financial estimates, increasing the risk that the pace of cuts may be on a quarterly basis from the outset.