Recent data has shown that the US Federal Reserve may stop cutting short-term interest rates in the face of rising productivity results, according to Chris Waller, a leading figure and Fed Reserve governor.
Waller would talk about the state of the financial market in the US Economic Club of New York, titled “No rush yet”.
“There is no rush to lower the base rate. “Indeed, it tells me that it is prudent to keep this rate at its current restrictive stance perhaps longer than previously thought to help keep inflation on a steady trajectory toward 2 percent,” Waller said. .
Waller is convinced that no cuts are the best policy
Waller has served the Federal Reserve since it was installed in 2020 and is a key policy maker on the Federal Open Market Committee.
Waller hasn't ruled out cuts later in 2024, but for now, he says, “I continue to believe that further progress will make it appropriate for the FOMC to begin reducing the target range for the federal funds rate this year. But until that progress is made, I am not ready to take that step. Fortunately, the strength of the american economy and the elasticity of the labor market means that the risk of waiting a little longer to ease policy is small and significantly lower than acting too quickly and possibly squandering our progress on inflation.”
The inflation results for this year have been unexpected, with Federal Reserve keeping a stoic grip on controls regarding rate cuts. The government unit is not inclined to have a strong reaction to the current financial climate.
Waller would also highlight the findings of the previous financial year and address the productivity gains recorded in 2023 and early 2024.
“Perhaps, they say, we are at the beginning of another era of rapid and sustained productivity growth, such as the United States experienced from 1998 to 2004,” he would say. “Believe me, I hope this is true because it would be the basis for shared prosperity that raises living standards, but I'm skeptical that it will last.” The first thing to note is that productivity growth is extremely volatile.”
It remains to be seen when or if Federal Reserve it will make any rate cut, but it will be in light of a sustained productivity increase that the United States hopes to last as long as possible.
Waller served as the Gilbert F. Schaefer Professor and Chair of Economics at the University of Notre Dame and would go on to become Executive Vice President and Director of Research at the Federal Reserve Bank of St. Louis. Book as a Board Member in 2020.
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