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FED: Gov Waller Eyes Potential For 3-4 Cuts In 2025

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Fed Governor Waller burnishes his dovish-leaning credentials in a CNBC interview, reiterating that he believes that inflation is going to continue heading to the 2% target, leaving the door open to rate cuts in the first half of 2025 (not ruling out a cut in Q1), with 3 or 4 cuts this year being "possible" depending on the data. 

  • That's more dovish an outlook than the market's 1.5 cuts and the December FOMC median's 2 cuts for the year, and comes on the heels of a below-expected December CPI print (which Waller suggests will translate into a core PCE result below 0.2% M/M, confirming analyst post-CPI expectations).
  • On inflation and the path to rate cuts: "The inflation data that we got yesterday was very good. It's the sixth month out of the last eight where core where we think core PCE inflation will come in below 0.2, which is getting very close to what our 2% inflation target would be in terms of core, so the inflation is good. We had a couple of bumps in September and October, but it looks like it's getting back to trend. We'll have to wait and see whether this continues. I believe it will."
  • "Last year, we got a shock with inflation in January, February. They kind of put us back in terms of our progress for cutting rates. I'm hoping that doesn't happen again, so that if, if we continue getting numbers like this, it's reasonable to think that possibly rate cuts could happen in the first half of the year...as long as the data comes in good on inflation or continues on that path, then I can, I can certainly see rate cuts happening sooner than maybe the markets are pricing in".
  • Re the timing of those rate cuts, Waller doesn't appear to rule out any possibilities: "I don't think March could be completely ruled out" depending on the data coming in "good". "January, we need to kind of see what's going to happen. You know, the Chair said, we're in really no rush to do things. We need to see a little more progress on inflation. This month was good, but we need to make sure we get through the turn of the year to make sure it continues, we'll have to wait and see."
  • On how many cuts the Fed could make this year: "depending on what the data tells you this year, three or four cuts this year, you think could be possible. It could be. It just hinges on the data. If the data doesn't cooperate, then you're going to be back to two and maybe even one, if we if we just get a lot of sticky inflation."
  • He's not concerned about the labor market as a source of undue inflation, saying that broader metrics do not show that it is overheating, and adding that "monetary policy is restrictive in exactly the way and in the areas we think it would be."
  • He repeats from his previous comments that "I don't think tariffs are going to have a significant impact or persistent effect on inflation, but we'll just have to wait and see what actually happens."
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Fed Governor Waller burnishes his dovish-leaning credentials in a CNBC interview, reiterating that he believes that inflation is going to continue heading to the 2% target, leaving the door open to rate cuts in the first half of 2025 (not ruling out a cut in Q1), with 3 or 4 cuts this year being "possible" depending on the data. 

  • That's more dovish an outlook than the market's 1.5 cuts and the December FOMC median's 2 cuts for the year, and comes on the heels of a below-expected December CPI print (which Waller suggests will translate into a core PCE result below 0.2% M/M, confirming analyst post-CPI expectations).
  • On inflation and the path to rate cuts: "The inflation data that we got yesterday was very good. It's the sixth month out of the last eight where core where we think core PCE inflation will come in below 0.2, which is getting very close to what our 2% inflation target would be in terms of core, so the inflation is good. We had a couple of bumps in September and October, but it looks like it's getting back to trend. We'll have to wait and see whether this continues. I believe it will."
  • "Last year, we got a shock with inflation in January, February. They kind of put us back in terms of our progress for cutting rates. I'm hoping that doesn't happen again, so that if, if we continue getting numbers like this, it's reasonable to think that possibly rate cuts could happen in the first half of the year...as long as the data comes in good on inflation or continues on that path, then I can, I can certainly see rate cuts happening sooner than maybe the markets are pricing in".
  • Re the timing of those rate cuts, Waller doesn't appear to rule out any possibilities: "I don't think March could be completely ruled out" depending on the data coming in "good". "January, we need to kind of see what's going to happen. You know, the Chair said, we're in really no rush to do things. We need to see a little more progress on inflation. This month was good, but we need to make sure we get through the turn of the year to make sure it continues, we'll have to wait and see."
  • On how many cuts the Fed could make this year: "depending on what the data tells you this year, three or four cuts this year, you think could be possible. It could be. It just hinges on the data. If the data doesn't cooperate, then you're going to be back to two and maybe even one, if we if we just get a lot of sticky inflation."
  • He's not concerned about the labor market as a source of undue inflation, saying that broader metrics do not show that it is overheating, and adding that "monetary policy is restrictive in exactly the way and in the areas we think it would be."
  • He repeats from his previous comments that "I don't think tariffs are going to have a significant impact or persistent effect on inflation, but we'll just have to wait and see what actually happens."