From CNBC: 2025-01-16 12:23:47

Federal Reserve Governor Christopher Waller anticipates multiple interest rate cuts in 2025 if inflation eases. The first cut could come in the first half of the year, with potential for more depending on economic data. Market bets for rate cuts increased following Waller’s comments, with expectations rising for a May or June move.

Waller’s optimism for easing is based on expectations that inflation will decrease throughout the year, despite recent data showing some price stickiness. The consumer price index slowed to a 3.2% core reading for December, slightly below the prior month but still above the Fed’s target. Waller believes inflation will trend towards the 2% target.

At the December meeting, the Federal Open Market Committee predicted two rate cuts for 2025. Waller’s comments hint at a potentially more aggressive approach, though he emphasized the need for cautiousness and patience. The FOMC is set to meet at the end of January, with no expected rate changes at this time.

Waller’s outlook for rate cuts is contingent on the data, with the possibility of three or four cuts if progress is made, or potentially fewer if inflation remains sticky. Market expectations have shifted following his remarks, with increased odds for a rate cut in the coming months.

Read more: Fed Governor Waller sees potential for multiple interest rate cuts in 2025