Top Fed Official Leans to Dec Rate Cut 12/03 06:08

   

   WASHINGTON (AP) -- A top Federal Reserve official said Monday that he is 
leaning toward supporting an interest rate cut when the Fed meets in two weeks 
but that evidence of persistent inflation before then could cause him to change 
that view.

   Speaking at George Washington University, Christopher Waller, a key member 
of the Fed's Board of Governors, said he was confident that inflation is headed 
lower and that the central bank will likely keep reducing its key rate, which 
affects many consumer and business loans.

   But he noted that there's a risk that inflation "may be getting stuck above" 
the Fed's 2% target, which would support an argument for keeping the Fed's rate 
unchanged this month.

   "At present, I lean toward supporting a cut to the policy rate at our 
December meeting," Waller said in his remarks to a conference held by the 
American Institute for Economic Research. "But that decision will depend on 
whether data that we will receive before then surprises to the upside and 
alters my forecast for the path of inflation."

   Waller's caution reflects a notable shift in the economic and inflation 
outlook in the past month or so. Growth in consumer spending and the broader 
economy was robust in the July-September quarter. In addition, inflation picked 
up in October after having slowed for most of this year.

   And Donald Trump's election victory has raised the prospect of widespread 
tariffs and mass deportations of migrants, both of which could elevate 
inflation. Some economists say they think the Fed might decide to cut its rate 
more slowly to allow time to evaluate the effects of Trump's policies.

   With inflation having steadily fallen from its peak in 2022, the Fed reduced 
its key rate by a half-point in September and by a quarter-point in November. 
And it signaled in September that it expected to announce another quarter-point 
cut later this month. Yet inflation has remained above the Fed's target level, 
clouding the Fed's next step.

   In October, "core" inflation, which excludes volatile food and energy costs, 
accelerated a bit. It rose 2.8% compared with a year earlier, up from 2.7% in 
September.

   Waller stressed that if future economic reports showed inflation or growth 
deviating from the Fed's expected paths, he could favor keeping rates unchanged 
this month.

   "If the data we receive between today and the next meeting surprise in a way 
that suggests our forecasts of slowing inflation and a moderating but 
still-solid economy are wrong, then I will be supportive of holding the policy 
rate constant," he said.

   Even so, Waller said the Fed's benchmark rate is high enough to restrict 
economic growth and inflation and so a quarter-point rate cut wouldn't involve 
much risk of reigniting inflation.

   "Cutting again will only mean that we aren't pressing on the brake pedal 
quite as hard," he said.

   In his speech, Waller acknowledged some frustration over the recent 
persistence of inflation.

   "I feel like an MMA fighter who keeps getting inflation in a choke hold, 
waiting for it to tap out, yet it keeps slipping out of my grasp at the last 
minute," he said. "But let me assure you that submission is inevitable -- 
inflation isn't getting out of the octagon."

   In recent remarks, other Fed officials have also suggested that they haven't 
yet made a final decision on whether to support a rate cut this month.

   Earlier Monday, Raphael Bostic, president of the Fed's Atlanta branch, said 
he was "keeping my options open" when asked whether he favored a rate cut in 
two weeks.