Swing a hawkish "sledgehammer" at Powell! Fed's Waller: There is no need to cut interest rates in a hurry

On Wednesday, Fed Governor Waller said there was no need to rush to cut rates, stressing that recent U.S. economic data showed that rate cuts should be postponed or reduced this year. Waller used the phrase "need not rush into action" four times in his speech, including the title of the speech that day.

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Waller called the recent U.S. inflation data "disappointing" and said he hoped to see better inflation data for at least a few months before cutting rates. Waller noted that in addition to inflation, the strong U.S. economy and labor market are reasons why the Fed can wait longer, and that the Fed has room to wait to be confident that inflation will continue to move towards its 2% target:

I think economic output and the labor market will continue to be strong, while progress in reducing inflation has slowed. Based on these indications, I don't think there is a need to rush to ease monetary policy.

Recent economic data tells me that it may be prudent to keep interest rates at their current restrictive levels for longer to help inflation move sustainably toward its 2% target.

Despite the overall hawkish speech, Waller said that a rate cut sometime this year would be appropriate as the U.S. economy makes further progress on inflation:

I remain confident that further progress will make it appropriate for the Federal Open Market Committee (FOMC) to start lowering the target range for the federal funds rate this year. But I'm not ready to take that step until that progress is achieved.

Fortunately, the strength of the US economy and the resilience of the labor market mean that the risk of waiting longer for policy to ease policy is small and significantly lower than the risk of acting too soon.

At the end of Waller's speech, industry insiders analyzed from different angles. Some people interpret that

Waller believes the current financial environment is still tight.

Waller noted that he would take a closer look at the easing of the financial conditions index, as it was mainly due to the stock market – specifically Mag 7. He also noted that the tightening of credit spreads may simply be due to an increase in private credit lending.

He believes that the current financial environment is tense because real interest rates remain high. (Previously, Powell's speech at the press conference was interpreted by the market as a possible further easing of financial conditions)

There is also an opinion that

Waller's speech this time was on behalf of the Fed hawks, waving a "sledgehammer" at Powell:

Fed's Waller's speech, titled "Still Not in a Hurry," suggests that the hawkish voting group within the Fed is putting more resistance to Powell's comments at the press conference.

In fact, it was they who wielded a hawkish sledgehammer at the press conference rhetoric.

Most recently, the 3-month core CPI rose to 4.2% in December from 3.3% in December. The six-month core CPI came in at 3.3% in December, rising to 3.9% in the previous month. These short-term inflation indicators show that inflation progress has slowed and may even come to a standstill, but more data is needed to know this.

Futures First的分析师RishiMishra表示：

Waller's speech was good! There could be some weak inflation data or an unexpected substantial deterioration in the economy, acting as a barrier between the Fed and a rate cut.

Last month, Nick Timiraos, a reporter for the Wall Street Journal known as the "new Fed news agency," wrote that Waller had set up a novel economic framework two years ago to show how the Fed could bring inflation back to its 2% target while maintaining low unemployment. With US inflation data gradually approaching 2% and the unemployment rate still at a nearly half-century low, Waller's view of a "soft landing" looks quite "prescient". Some analysts believe that as a Fed policymaker who is "appreciated" by Trump, if Trump is re-elected president of the United States,

Waller is likely to succeed current Fed Chair Jerome Powell, whose term ends in May 2026, as the next Fed chair.

Waller's speech was not the only one among influential senior Fed officials. Atlanta Fed President Bostic, a member of this year's vote committee and previously dovish, has said at least twice in recent days that it now appears that he expects the Fed to cut rates only once this year, instead of the two as originally expected. He also expects the Fed to start cutting rates later this year, and the first cut could come a little later than he had previously expected. His confidence that US inflation will fall back to the target of 2% is no longer so high.

Fed officials, who have kept interest rates at more than 20-plus highs since last July, are discussing when and how much to cut rates this year. On Wednesday, Fed officials unexpectedly maintained their expectations of three rate cuts this year, Fed Chairman Jerome Powell said at a press conference that a rate cut at some point this year is appropriate, and that a QT reduction will happen soon, and most officials still believe that they may be confident in inflation, which has led investors to bet that the Fed's first rate cut of the year will come in June.

This article does not constitute personal investment advice, does not represent the views of the platform, the market is risky, investment needs to be cautious, please make independent judgment and decision-making.