Federal Reserve official, Christopher Waller, attended a Fed Listens event in Washington D.C. on September 23, 2022. Waller, who is a key player on the Federal Reserve Board of Governors, discussed the future of interest rates, suggesting that they may not be cut as drastically as they were in September. He voiced concerns that the economy might still be operating at a pace that is too quick.

Waller cited recent data from employment, inflation, GDP and income reports, stating that these figures hint that the economy may not be slowing down as much as they would like. He emphasized that while this data should not be overlooked or reacted to impulsively, it does suggest that monetary policy should be more cautious in its approach to rate cuts than it was during the September meeting.

In September, the Federal Open Market Committee made a rare move by slashing its base interest rate by half a percentage point to a target range of 4.75% to 5.00%. Historically, the Fed has only made such a drastic cut during times of economic crisis, typically preferring to adjust rates by a quarter percentage point.

Following this cut, officials indicated the potential for another half point reduction in the final two meetings of 2024, with a full percentage point of cuts in 2025. However, Waller did not confirm these future actions, stating, “Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year.”

Recent data for the Fed has been inconsistent. While the labor market showed stronger results in September after a summer slowdown, inflation was slightly higher than anticipated, and GDP has remained robust. The Commerce Department also recently revised the second quarter’s gross domestic income growth to 3.4%, a significant increase from the previous estimate, bringing it in line with GDP. The savings rate was also adjusted higher to 5.2%.

Waller concluded, “These revisions suggest that the economy is much stronger than previously thought, with little indication of a major slowdown in economic activity.” This comment is particularly important for those interested in investing or keeping an eye on economic trends, though the main focus of the article is not investment advice.