Waller's attitude change: the Fed is closer to cutting interest rates, but the time has not yet come.

More and more Fed officials are signaling that they are expected to cut interest rates in a few months' time. The latest similar remarks come from Waller, a Fed governor who has the right to vote at the FOMC meeting of the Federal Reserve Monetary Policy Committee permanently once Trump is elected earlier this year.

On Wednesday, July 17th, US Eastern Time, Waller said in a prepared speech in Kansas City that the US economy is getting closer to the state where the Fed can cut interest rates, and hinted that it is not yet time, and he hopes to see "more evidence" that inflation is on the right track of continuous decline. Waller said:

"The current data is consistent with achieving a soft landing, and I will look for data to support this view in the coming months. I don't think we have reached the final destination yet, but I do believe that we are getting closer and closer to the moment when it is necessary to cut the policy interest rate. "

Two months ago, Waller said that he hoped to see "several months" of favorable data to support interest rate cuts, and hinted that it might not be necessary to cut interest rates before December this year. On Wednesday, he said that the recent labor market conditions and inflation data showed that inflation had resumed downward progress. The media commented that this remark paved the way for a rate cut before September.

The media pointed out that Waller has been focusing on the necessity of reducing inflation for two years. On Wednesday, he emphasized the importance of preventing further slowdown in the labor market, which is an important change for him. Waller said:

"At present, the labor market is at its best. We need to keep the labor market in this best state. "

Waller is an important voice in the inflation debate within the Federal Reserve, and his views deserve special attention. Waller is regarded as a "hawk" by nature. At the end of May, he said that he hoped to see "good inflation data for several months" before supporting the interest rate cut. The year-on-year growth rate of PCE price index, the inflation indicator favored by the Federal Reserve, announced after his last monetary policy speech, has slowed down from 2.7% to 2.6%, and it is expected to further decline. The core PCE price index has also slowed down to 2.6%, the lowest growth rate in three years.

At present, it is widely expected that the Federal Reserve will cut interest rates for the first time in this tightening cycle in September. However, like other Fed officials, Waller did not provide guidance on when the Fed will cut interest rates on Wednesday. Instead, he analyzed three different scenarios that will occur in the US economy in the next few months and possible policy options for these situations. The premise of all scenarios is that the labor market will not be significantly weak. These scenarios are:

If the inflation data in the next two months is as mild as that in May and June, the Fed will cut interest rates in September.

If the inflation data is mixed, the path of interest rate cut will be more uncertain.

If inflation picks up sharply and lights up the red light to reduce inflation, the Fed will postpone interest rate cuts, just as it did this spring.

Waller believes that the most likely situation is that inflation is "unbalanced"-not as good as the recent report, but still consistent with the overall progress of reducing inflation to 2%. He said that in this case, the uncertainty of the recent interest rate cut is even greater. Another possibility is that the inflation data will continue to be "very favorable". In this case, Waller said, "I can foresee that interest rates will be cut in the near future."

Waller spoke earlier, and on Wednesday, Williams, the "third-in-command" of the Federal Reserve and chairman of the new york Federal Reserve, said that if inflation continues to slow down, interest rates will be cut in the next few months. There are signs that the labor market in the United States is cooling down, and the inflation data in the past three months are "getting closer and closer to the deflation we want".

Nick Timiraos, a well-known financial journalist known as the "Fed News Agency", believes that Williams hinted that the Fed is close to cutting interest rates, but it is not ready to cut interest rates, which means that it will not cut interest rates in July and may consider cutting interest rates in September.

On Monday, Federal Reserve Chairman Powell also hinted that a rate cut was coming. He said that including last week's data, inflation in the United States made more progress in the second quarter of this year. The last three inflation reports were "quite good" and "indeed enhanced" the Fed's confidence that inflation would continue to fall to the target.

Powell pointed out that while paying attention to the cooling of inflation, the Fed has also begun to pay more attention to the potential weakness risk of the labor market. Some analysts said that the recent remarks of many Fed officials are strengthening this key tone change.

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