The landscape of monetary policy in the United States is influenced heavily by statements made by key Federal Reserve officialsRecently, one figure has notably stepped into the spotlight: Christopher Waller, a member of the Board of Governors and a key decision-maker in the Federal Open Market Committee (FOMC). On a recent Monday, he indicated a preference for a continuation of the Federal Reserve's rate cuts, potentially signaling a significant shift in monetary policy as the year comes to a close.

Waller, who has established himself as a reliable barometer for assessing U.Smonetary policy, stated at a forum organized by the American Enterprise Institute that he is inclined to support a reduction in policy rates during the upcoming December meetingHis reasoning stems from a consistent pattern in recent economic data showing a noticeable moderation in demand relative to supply over the past year

Furthermore, inflation rates seem to be aligning with the Fed's 2% target, and employment conditions appear stable without severe deterioration, bolstered by elevated borrowing costs that suppress demand.

These comments from Waller have invigorated market expectations for a possible interest rate cut in December, with the probability of such a move climbing to 75% according to the CME FedWatch Tool as of Tuesday noon in BeijingInvestors are keenly aware that if the Fed indeed opts for a quarter-point reduction in rates at their December 17-18 policy meeting, it would mark the third such cut for the yearAlready, interest rates have seen two reductions in September and November, dropping the federal funds rate by a total of 75 basis points to the range of 4.5% to 4.75%.

In addition to Waller's remarks, other prominent Fed officials weighed in on the topic of interest rates on the same day

John Williams, president of the New York Federal Reserve, acknowledged the necessity of further rate cuts, although he emphasized that the timing hinges on forthcoming economic dataSimilarly, Raphael Bostic, president of the Atlanta Federal Reserve, stated he was keeping his options open regarding this month’s potential rate cutBoth Williams and Bostic serve as permanent voting members on the FOMC, while Bostic rotates in as one of the four yearly temporary voting members.

As the week progresses, the U.Sgovernment is set to unveil a series of crucial economic reportsThe most anticipated is the non-farm payroll report for November, which will be released on Friday, alongside the consumer price index (CPI) poised for next WednesdayEconomists from major financial institutions suggest that November’s non-farm payrolls could see an increase of less than 150,000, reflecting the disruptions from recent hurricanes and labor strikes, including Boeing's widespread walkout, which significantly impacted job numbers in October.

Bostic, through an editorial on the Atlanta Fed's website, noted that the Fed has made substantial strides in achieving its dual mandates of price stability and full employment

Nevertheless, he underscored the uncertainty surrounding the sustainability of positive macroeconomic momentumSuch uncertainties pose risks to both the labor market and inflation, which must be monitored closely moving forward.

Diving deeper, Williams reiterated the position of monetary policy within a "restrictive" domain and suggested that as time elapses, further rate reductions may be in order, all while indicating that future actions will closely follow economic indicators"What we've learned in the past five years is that the outlook remains highly uncertain," Williams remarked during a Chamber of Commerce event in Queens last Monday.

A prevailing theme among the trio of Fed officials was the rising concern regarding potential inflationary pressuresWaller specifically cautioned that progress toward the 2% inflation target may stall as current monetary policies struggle to mitigate rising prices within the service sector

alefox

He indicated that should unexpected economic data emerge before the upcoming Fed meeting, he would favor keeping rates steady.

Bostic echoed similar sentiments, remarking that while the process of decelerating inflation has not fully stagnated, certain prices indeed carry upward risksHe pointed to the persistent high costs in housing and certain service industries, along with geopolitical uncertainties that could engender fresh inflationary pressuresGiven the complex economic backdrop of the previous years, he advocated for vigilance regarding any unforeseen developments.

Recent data bolster the claim that U.Sinflation remains stickyThe Personal Consumption Expenditures (PCE) price index witnessed a month-on-month increase of 0.2% in October, remaining on par with previous readings, while the year-on-year growth hit 2.3%, a 0.2 percentage point rise compared to SeptemberWhen excluding the volatile food and energy segments, the core PCE index saw a month-on-month increase of 0.3%, maintaining its previous growth rate and reflecting a year-on-year increase of 2.8% — slightly up by 0.1 percentage point from the previous month, underscoring its significance as the Fed's favored inflation gauge.

Moreover, proposed fiscal policies aimed at increasing tariffs on imported goods and the aggressive deportation of undocumented immigrants could further elevate inflationary pressures