(Bloomberg) — Federal Reserve Governor Christopher Waller said the US central bank could lower interest rates again in the first half of 2025 if inflation data continues to be favorable.
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“The inflation data we got yesterday was very good,” Waller said Thursday in an appearance on CNBC.
If future inflation figures fall in-line with December’s positive report, Waller said the Fed may cut more this year and sooner than investors are currently expecting.
“If we continue getting numbers like this, it’s reasonable to think rate cuts could happen in the first half of the year,” he said, adding that he wouldn’t entirely rule out a cut in March.
Waller said officials’ median estimate of the so-called neutral rate, one that neither encourages nor inhibits economic growth, implies that three or four cuts this year are possible, depending on incoming data.
“It just hinges on the data,” he said. “If the data doesn’t cooperate, then you’re going to be back to two, maybe even one if we just get a lot of sticky inflation.”
A chorus of Federal Reserve officials welcomed fresh inflation data this week that showed a cooldown in underlying price pressures in December. Still, many policymakers have signaled they expect a slower pace of interest-rate cuts in 2025 compared with the closing months of 2024.
Fed officials slashed rates at three consecutive meetings last year, most recently with a quarter-point cut in December. They penciled in two cuts in 2025, according to the median projection released last month.
Meanwhile, recent employment figures have helped allay concerns of a material slowdown in the labor market. Employers added jobs at a brisk pace at the end of the 2024, while the unemployment rate fell.
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