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Waller Downplays Rent Inflation Within CPI

[paraphrasing Waller's Brookings Q&A]
  • Q: You’ve described soft landing scenario and inflation approaching 2% goal. Why move slowly and gradually? Why talk about 75bps of cuts this year?
  • A: The key thing is the economy is doing well and giving us flexibility. We can see how the data comes in and if progress is being sustained. The worse this is if it starts to reverse and we’ve started to cut. We can slowly calibrate the real rate down – if we need to move it faster we can move it faster. The key is to have the flexibility to be methodological.
  • Q: One of the issues in underlying inflation data is that rents have been stickier than anticipated. Do you need to see rents come down or can you look through it?
  • A: We’ve been talking about this since the end of 2022 as all the signals were saying it’ll come down. We all think it’s coming through but at the end of the day I’ve never been a big fan of focusing on one component of the price index. I don’t like getting into used cars or rents. It’s when we add them all up that matters.

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