Economy
Fed’s Waller: can wait on data to decide on rate path
© Reuters. FILE PHOTO: A cyclist passes the Federal Reserve building in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo
(Reuters) -In a strong signal that the Federal Reserve won’t raise interest rates at its next meeting but could easily do so later, Fed Governor Christopher Waller on Wednesday said he wants to “wait, watch and see” if the U.S. economy continues its run of strength or weakens in the face of the Fed’s rate hikes to date.
“Should the real side of the economy soften, we will have more room to wait on any further rate hikes and let the recent run-up on longer-term rates do some of our work,” Waller, one of the Fed’s most hawkish policymakers, said in remarks prepared for delivery to the European Economics & Financial Center Seminar in London. “But if the real economy continues showing underlying strength and inflation appears to stabilize or reaccelerate, more policy tightening is likely needed despite the recent run-up in longer-term rates.”
The Fed drove its policy rate up aggressively last year to bring inflation down from 40-year highs, and this year there has been clear progress on reducing price pressures, even as the job market has remained strong, Waller said in his remarks.
“The data in the past few months has been overwhelmingly positive for both of the FOMC’s goals of maximum employment and stable prices,” he said. But that can’t continue, he said.
If the economy slows, “we can hold the policy rate steady and let the economy evolve in the desired manner,” he said.
But if demand and economic activity continue at their recent pace, that could put upward pressure on inflation, and “more action would be needed on the policy rate to ensure that inflation moves back to target and expectations remain anchored.”
Waller was among the earliest in 2021 to push for Fed policy tightening to bring down inflation, and among the most vocal supporters of “frontloading” the rate-hike campaign in big chunks last year to puncture price pressures more quickly.
The central bank did exactly that, lifting its short-term policy rate from near zero in March 2022 to a range of 5.25%-5.50% in July of this year, where it has held it since.
Now, Fed policymakers are weighing if that level is high enough to get inflation on a path to their 2% goal. Some have recently pointed to the nearly full percentage point rise in the yield on the 10-year Treasury note since the Fed’s July rate hike, saying the elevated long-term market rates will likely blunt demand and economic activity, leaving less for the Fed to do.
Other Fed policymakers have pointed to a recent, though so-far short-lived, acceleration in inflation and job growth, signs the Fed’s policy may not be restrictive enough.
Waller on Wednesday said it is “too soon to tell.”
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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