Multiple interest rate cuts could be possible in 2025, according to Fed Governor Waller.

• If inflation eases as expected, the central bank may lower interest rates multiple times this year, according to Fed Governor Christopher Waller.
• If the data on inflation remains positive or stays on course, then I believe rate cuts will occur sooner than the markets anticipate, according to him.
• Following Waller's remarks, traders increased their bets for a more aggressive pace of rate cuts.

If inflation eases as expected, Federal Reserve Governor Christopher Waller stated on Thursday that the central bank may lower interest rates several times this year.

The policymaker stated in a CNBC interview that the first cut could occur in the first half of the year, and additional cuts may follow if economic data on prices and unemployment remain cooperative.

If the data on inflation remains positive or stays on course, then I believe rate cuts will occur sooner than the markets anticipate, according to Waller in a "Squawk on the Street" interview with Sara Eisen.

He replied, "The number of possibilities will depend on the data. If we make significant progress, you could potentially do more, which could mean three or four, based on quarter percentage point increments."

If the data doesn't cooperate, then we may have to go back to two and possibly even one, if we experience a lot of sticky inflation, he said.

Following Waller's remarks, traders increased their bets for a more aggressive pace of rate cuts, resulting in market-implied odds for a May move rising to about 50%. However, June was perceived as the better bet, according to CME Group data. Expectations for a second reduction by the end of the year also increased to about 55%, which is about 10 percentage points higher than before he spoke.

Waller believes that inflation will ease further as the year progresses, despite data showing stickiness in some key prices. The consumer price index for December was 3.2%, a 0.1 percentage point decrease from the previous month, but still above the Fed's 2% target.

"I believe inflation will continue to move towards our target, and the stickiness we observed in 2024 will begin to dissipate. This makes me more optimistic about inflation coming down than my colleagues, which is influencing my outlook on policy."

Though commentary after the meeting has suggested a cautious and patient approach, Federal Open Market Committee members predicted two cuts for 2025 at the December meeting.

The FOMC will meet on January 28-29, with markets predicting little chance of a rate change.

Waller stated, "We need to wait and see what happens in January. There's no rush to act."