At least one official from the Federal Reserve thinks the intereste rate policies the Fed has been setting are working.
Christopher Waller, who sits on the Fed’s Board of Governors, said earlier this week he’s “increasingly confident” the Fed’s policies will bring inflation down to the 2% target.
But, in a speech at the American Enterprise Institute, a Washington think tank, Waller also said inflation is still too high and expressed uncertainty over whether a recent slowdown in price increases can continue, according to a report from The Associated Press. Still, it was the most optimistic any Fed officials have sounded since the Fed started its string of raising interest rates 11 times since March 2022.
“I am increasingly confident that policy is currently well-positioned to slow the economy and get inflation back to 2%,” Waller said in his speech, the AP reported.
During a question-and-answer session afterward, Waller left open the possibility that the Fed could cut its key short-term interest rate in the coming months.
If inflation continues to cool “for several more months — I don’t know how long that might be — three months, four months, five months — that we feel confident that inflation is really down and on its way, that you could then start lowering the policy rate just because inflation is lower,” Waller said. “It has nothing to do with trying to save the economy or recession,” the AP reported.
Fed officials have previously suggested that eventually, cooling inflation would lead the Fed to cut rates. That’s because, adjusted for inflation, the central bank’s benchmark rate in effect rises as inflation falls.
