Waller, the Fed governor, believes that caution is necessary when lowering interest rates.

• On Monday, Governor Christopher Waller indicated that future interest rate reductions may not be as significant as the September cut.
• He stated that despite any events that may occur in the short term, his baseline forecast still requires a gradual reduction of the policy rate over the next year.

On Monday, Federal Reserve Governor Christopher Waller indicated that future interest rate cuts may not be as significant as the September move, as he expressed worry that the economy might still be operating at an undesirable speed.

Recent reports on employment, inflation, GDP, and income suggest that the economy may not be slowing down as much as desired, according to the policymaker.

Waller stated in prepared remarks at a Stanford University conference that the totality of the data suggests that monetary policy should proceed with more caution on the pace of rate cuts than was necessary at the September meeting.

The Federal Open Market Committee lowered its baseline interest rate by 50 basis points to a target range of 4.75%-5.0% at its September meeting, which is an unusual step for the Fed. In the past, the Fed has only done this during times of crisis and prefers to move in increments of a quarter percentage point, or 25 basis points.

Officials hinted at the possibility of additional cuts in the final two meetings of 2024, including a full percentage point in 2025. However, Waller remained vague about the future.

He stated that despite any events that may occur in the short term, his baseline forecast still requires a gradual reduction of the policy rate over the next year.

Recent data from the Fed has shown mixed results, with the labor market showing stronger numbers in September, the consumer price index inflation gauge being slightly higher than anticipated, and GDP holding strong.

The Commerce Department revised the second-quarter growth forecast, increasing the GDP gain to 3.4% and raising the savings rate to 5.2%.

Waller stated that the economy is stronger than previously believed, with minimal signs of a significant slowdown in economic activity based on these revisions.