US Fed 'within striking distance' of inflation target: official

US Fed 'within striking distance' of inflation target: official

The US Fed is within striking distance of hitting its target, Governor Christopher Waller said Tuesday
The US Fed is within striking distance of hitting its target, Governor Christopher Waller said Tuesday. Photo: SAUL LOEB / AFP/File
Source: AFP

The US Federal Reserve is "within striking distance" of reaching its long-term inflation target and could begin cutting interest rates this year, a senior official said Tuesday.

"I am becoming more confident that we are within striking distance of achieving a sustainable level of two percent PCE inflation," Fed Governor Christopher Waller said at a virtual event, referring to the Fed's favored inflation gauge.

He added that recent data has made him more certain than he has been since 2021 that inflation is on the right path.

Members of the Fed's rate-setting Federal Open Market Committee (FOMC) recently voted to hold interest rates at a 22-year high, and penciled in up to three rate cuts for this year, citing progress against inflation.

The personal consumption expenditures (PCE) price index -- the Fed's favored inflation measure -- fell to an annual rate of 2.6 percent in November, while economic growth and job creation have shown signs of slowing.

Read also

Asian markets down as traders fret over rate cut outlook

"I believe policy is set properly," Waller said. "It is restrictive and should continue to put downward pressure on demand to allow us to continue to see moderate inflation readings."

"As long as inflation doesn't rebound and stay elevated, I believe the FOMC will be able to lower the target range for the federal funds rate this year," he continued.

He added that when the time comes, interest rates "can and should be lowered methodically and carefully," in a less rapid way than the Fed has done previously.

Futures traders have assigned a probability of close to 98 percent that the Fed will vote to hold interest rates steady later this month, and a probability of more than 65 percent that it will begin cutting rates in March, according to CME Group data.

Read also

Biden sells economic strength, but voters aren't buying yet

Tapering 'this year'

The Fed embarked on a policy of so-called "quantitative easing" during the Covid-19 pandemic, swelling the US central bank's balance sheet to almost $9 trillion in a bid to support the economy through economic turmoil unleashed by the virus.

Since rolling back the policy in 2022, the Fed has steadily reduced its holdings to around $7.7 trillion.

In recent months, analysts have been attempting to predict when it would begin "tapering," or slowing down, the reduction in the size of its balance sheet.

Waller indicated Tuesday that tapering was on the cards in the not-too-distant future.

"I would say sometime this year would be a reasonable thing to start thinking about," he said.

Waller also added he did not see the current attacks by Yemen's Huthi rebels on commercial and military ships in the Red Sea posing a big inflationary concern to the US economy.

Read also

US consumer inflation jumps more than expected to 3.4%

"There are alternative routes," he said.

New feature: Сheck out news that is picked for YOU ➡️ click on “Recommended for you” and enjoy!

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.

Online view pixel