Analysis from economic reports and official inflation statistics

Fed's Waller Backs 2025 Rate Cuts Despite December's Close Call and Trump Policy Concerns

Jan 8, 2025, 07:00 PM

Federal Reserve Governor Christopher Waller expressed support for further interest rate cuts in 2025, contingent on continued progress toward the central bank's 2% inflation target. Waller emphasized that the pace of these cuts would depend on inflation developments and the state of the labor market. He noted that inflation is expected to continue declining toward the 2% goal, despite recent slower progress attributed to factors like imputed prices for housing and nonmarket services. Waller also mentioned that geopolitical conflicts and tariffs could potentially increase price pressures, though he does not anticipate tariffs to have a significant impact on inflation. Additionally, he highlighted that the U.S. economy remains on solid footing with no immediate signs of a dramatic weakening in the labor market. The Federal Reserve's December meeting minutes, released on the same day, revealed that officials expect to slow the pace of rate cuts in 2025 due to concerns over persistent inflation and potential policy changes under the incoming Trump administration. The minutes indicated that a majority of Fed officials supported a 25 basis point rate cut in December, but the decision was closely contested, with some advocating for a pause due to inflation risks. The Fed's staff projected slightly lower GDP growth and a slightly higher unemployment rate for 2025, factoring in potential policy shifts.