Recent data has shown that the US Federal Reserve may hold back from cutting short-term interest rates amid rising productivity results, according to leading figure and Fed Reserve governor Chris Waller.
Waller will speak about the situation of the US financial market at the Economic Club of New York under the title “There is no rush yet”.
“There is no rush to cut the policy rate. In fact, it tells me that it is prudent to keep this rate at the current tight position perhaps longer than previously thought to help keep inflation on a sustainable trajectory towards 2%,” Waller would say.
Waller is confident that no cuts are the best policy
Waller has served at the Federal Reserve since it took office in 2020 and is a key policymaker on the Federal Open Market Committee.
Waller did not rule out cuts later in 2024, but for now, he says, “I continue to believe that further progress will make it appropriate for the FOMC to begin reducing the target range for the federal funds rate this year. But until this progress materializes, I am not ready to take this step. Fortunately, the strength of the US economy and the resilience of the labor market mean that the risk of waiting a little longer to ease monetary policy is small and significantly lower than acting too early and risk squandering our inflation progress ”.
The inflation results for this year were unexpected, with the Federal Reserve maintaining a stoic grip on rate cut controls. The government body is not willing to have a knee-jerk reaction to the current financial climate.
Waller would also highlight the results of the previous financial year and address the productivity growth seen in 2023 and early 2024.
“Perhaps, they say, we are at the beginning of another era of rapid and sustained productivity growth, like that experienced by the United States from 1998 to 2004,” he would say. “Believe me, I hope this is true because it would form the basis for widely shared prosperity that would raise living standards, but I am skeptical about how long it will last. The first thing to note is that productivity growth is notoriously volatile.”
It remains to be seen when and if the Federal Reserve will make any rate cuts, but it will come in light of a period of sustained productivity growth that the United States hopes will last as long as possible.
Waller was a professor and holder of the Gilbert F. Schaefer Chair in Economics at the University of Notre Dame and would become executive vice president and director of research at the Federal Reserve Bank of St. Louis before taking the job at the Federal Reserve. He books as a board member in 2020.
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