Fed’s Waller: Fed to discuss policy cuts in 2024 on near-term data

Fed Governor Christopher Waller has warned that despite data developments in the inflation outlook allowing the Fed to begin outlining plans for rate cuts looking forward, markets shouldn’t be expecting the Fed to rush anytime soon.

Money markets adjusted rate cut bets after Waller’s notes, Fed swaps now see 15 basis points of easing in March versus last Friday’s bets of 19 bps.

Key Quotes:

Recent data allows Fed to consider policy rate cuts, but only if inflation continues to moderate.

Markets need to be aware of revision risks in inflation prints.

Waller believes current policy is set properly.

Fed needs to be “cautious”, cannot rush into rate cuts.

Waller reaffirms his outlook is consistent with dot plot; three 25 bps cuts by the end of 2024.

Waller also believes the Fed is “within striking distance” of 2% inflation.