Fed Floats Slower Interest Rate Hikes Amid Progress on Inflation

Fed Floats Slower Interest Rate Hikes Amid Progress on Inflation

In the wake of better-than-expected Consumer Price Index (CPI) numbers released last week, Federal Reserve officials confirmed that the central bank may consider slowing the pace of interest rate hikes.

In the wake of better-than-expected Consumer Price Index (CPI) numbers released last week, Federal Reserve Gov. Christopher Waller on Sunday confirmed that the central bank may consider slowing the pace of interest rate hikes, but that should not be seen as a “softening” in its overall commitment to taming inflation, according to a new Reuters report.

“We're at a point [where] we can start thinking maybe of going to a slower pace,” Waller said on Sunday during an economic conference organized by UBS in Australia.

But “we're not softening. … Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there.”

According to the Bureau of Labor Statistics, the CPI in October climbed 0.4 percent for the month and 7.7 percent year-over-year, the lowest annual increase since January. Economists had expected prices to rise at an annual 7.9 percent clip and 0.5 percent month-over-month, per Bloomberg estimates. Excluding volatile food and energy costs, the core CPI trekked higher by 0.3 percent for the month and 6.3 percent on an annual basis, which was also less than expected.

“We're going to need to see a continued run of this kind of behavior and inflation slowly starting to come down before we really start thinking about taking our foot off the brakes,” Waller said, adding that he is only further convinced that the Fed is on the right track because its rate increases so far have not “broken anything.”

Earlier this month, the central bank signed off on a fourth-straight seventy-five-basis-point interest rate hike, boosting its short-term borrowing rate to a target range of 3.75 percent to 4 percent, the highest level since January 2008. The Fed has raised rates a total of 3.75 percentage points this year beginning in March.

Meanwhile, as reported by CNBC, Fed Vice Chair Lael Brainard on Monday seemingly reaffirmed Waller’s stance, indicating that it may “soon” be appropriate to pivot to a slower pace of rate hikes.

“I think it will probably be appropriate soon to move to a slower pace of rate increases,” she told Bloomberg News.

“I think what’s really important to emphasize is we’ve done a lot but we have additional work to do both on raising rates and sustaining restraint to bring inflation down to 2 percent over time,” she continued.

“We have raised rates very rapidly … and we’ve been reducing the balance sheet, and you can see that in financial conditions, you can see that in inflation expectations, which are quite well-anchored.”

Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.