Overview
Federal Reserve Governor Christopher Waller on Friday dismissed the idea of near-term interest rate cuts, pointing to inflation that still sits above the central bank's long-run objective and a labor market he described as stabilizing. "It's just kind of crazy to say you could start talking about rate cuts in the near future," Waller said. He added that, based on current data, it would be unreasonable for policymakers to suggest cutting rates by September or a similar near-term timeframe: "You just can’t look at this data and say yeah we could cut rates by September or something…You can’t be serious as a central banker and talk like that."
Inflation expectations
Waller identified inflation expectations as a focal point of his concern. He drew a distinction between expectations over different time horizons, saying that rising expectations in the two- to four-year range would be problematic, while increases over the shorter run would be alarming and could prompt policy intervention. When assessing these expectations, the governor said he generally places more weight on market-based measures.
Balance sheet and reserves
On the Fed's balance sheet, Waller asserted that the central bank cannot revert to the much smaller balance sheet seen in 2008. He said the Fed intends to preserve an ample reserves system rather than move back to a scarce reserve configuration, signaling a long-term operational preference for how reserves are structured.
Independence and outreach
Waller also spoke about the institutional importance of central bank independence, stating he holds very strong beliefs on the matter. He noted explicitly that he has not spoken to Warsh about policy, underscoring that he has not engaged in that particular outreach regarding policy discussions.
This report summarizes Governor Waller's public remarks on policy stance, inflation expectations, balance sheet strategy, and central bank independence.