Fed's Christopher Waller Supports Interest Rate Cut Pause, Signals Possible Reductions Later in 2024

Federal Reserve Governor Christopher Waller has voiced support for pausing interest rate cuts, acknowledging that inflation has shown uneven progress. However, Waller has left the door open for potential rate reductions later this year, depending on how inflation trends in 2024.
In a February 17 speech delivered in Sydney, Australia, Waller acknowledged that the inflation data for January had been disappointing, with progress on inflation remaining inconsistent. He emphasized that if the year unfolds similarly to 2024, interest rate cuts could be “appropriate” later in the year.
Waller stated, “I continue to believe that the current setting of monetary policy is restricting economic activity somewhat and putting downward pressure on inflation.”
Pausing Rate Cuts Amid Uncertainty
Despite the uneven progress on inflation, Waller suggested that pausing rate cuts for now would allow time for clearer economic signals. He explained, “If this winter-time lull in progress is temporary, as it was last year, then further policy easing will be appropriate. But until that is clear, I favor holding the policy rate steady.”
The Federal Reserve opted to keep rates unchanged at its January policy meeting after previously lowering rates by one percentage point toward the end of 2024. Waller noted that, although the 12-month inflation readings were lower than at the start of the year, they remained “too high.” This reflects the ongoing persistence of inflation despite some progress.
The latest data from CME Group's FedWatch Tool shows that market expectations for a rate cut in the upcoming March Fed meeting are slim, with the odds of a 0.25% cut sitting at just 2.5%.
Implications for the Crypto Market
Interest rate cuts are generally seen as positive for riskier assets, including Bitcoin and the broader cryptocurrency market. Lower borrowing costs can encourage investors to seek higher-risk returns, potentially benefiting crypto prices.
Waller's cautious stance on rate cuts indicates that the Fed is waiting for clearer signals on inflation before making further adjustments to its policy. However, if inflation remains contained, investors in the crypto market might anticipate rate cuts later in the year.
Waller on Trade Tariffs and Inflation
In his speech, Waller also addressed concerns about U.S. President Donald Trump's trade policies, particularly the tariffs imposed by the White House. He speculated that these tariffs would only cause "modest price increases" and would likely not have a persistent inflationary impact.
“Of course, I concede that the effects of tariffs could be larger than I anticipate, depending on how large they are and how they are implemented,” Waller acknowledged. However, he added that there could be counteracting factors at play. “It is possible that other policies under discussion could have positive supply effects and put downward pressure on inflation,” he said.
Trump’s Tariffs and Market Reactions
On February 13, President Trump signed an executive order imposing reciprocal tariffs on the U.S.'s trading partners, including provisions for non-monetary policies to meet the criteria for these import taxes. Earlier, on February 1, Trump launched tariffs against Canada, Mexico, and China, causing significant volatility in both stock and crypto markets.
Despite the initial market turmoil, the crypto market rebounded after the U.S. delayed tariffs on Mexico and Canada for 30 days starting February 3. This pause in tariff actions has helped stabilize market conditions, particularly for cryptocurrencies, which are sensitive to macroeconomic developments.
Looking Ahead
The economic landscape remains uncertain as the Federal Reserve evaluates inflation trends and geopolitical factors like tariffs. Waller's stance on holding interest rates steady for now, coupled with his openness to potential rate cuts later in the year, reflects the Fed's cautious approach to navigating ongoing inflation challenges.
The crypto market, in particular, will be watching closely for any signs of policy shifts, as future rate cuts could play a pivotal role in shaping investor sentiment and market activity.
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