A senior Fed official says the inflation battle appears to be over, with interest rate cuts looming


WASHINGTON (AP) — A senior Federal Reserve official said Tuesday he is increasingly confident that inflation will continue to fall this year to the Federal Reserve’s target level of 2%, after two years of accelerating price rises that have hurt millions of American households.

Official Christopher Waller, an influential member of the Fed’s Board of Governors, noted that inflation was slowing even as growth and employment remained strong – a combination he described as “about the best you can get.”

Waller’s comments follow recent comments from other senior Fed officials suggesting the central bank remains on track to begin cutting its benchmark short-term interest rate this year. In December, policymakers collectively predicted they would cut interest rates three times this year. Wall Street investors and many economists expect the first cut in March.

“The progress I have observed on inflation, combined with available data on economic and financial conditions and my expectations, makes me more confident than I have been since 2021 that inflation is on track to 2%,” Waller said in written remarks. To the Brookings Institution.

Consumer inflation, according to the Fed’s preferred measure, rose to about 7% in mid-2022, compared with the previous year. In response, starting in March 2022, the Fed raised its key interest rate 11 times, to its highest level in 22 years. Inflation on an annual basis It fell to 2.6% in NovemberThe Fed’s gauge showed.

Waller pointed out that the economy continues to expand modestly, with the unemployment rate reaching only 3.7%, which is not much higher than its lowest levels in half a century, while inflation is calming.

“But will it last?” Asked. “Ultimately, I feel more confident that the economy can continue on its current path.”

Waller avoided giving any hints about the potential timeline for Fed rate cuts. He said the timing and pace of cuts would depend on the path of inflation and other economic data.

Waller has observed an important shift in the Fed’s focus, from a single-minded focus on fighting inflation to a more balanced stance. He said the central bank must now think about controlling inflation and keeping unemployment low. Such a shift suggests the Fed may cut interest rates quickly if the economy and employment show signs of faltering in the coming months.

“Today, I see the risks to employment and our inflation mandates as closely balanced,” he said.

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