Fed's Waller Hints at Multiple Rate Cuts in 2025 if Inflation Continues Its Current Disinflationary Trend

Speaking on CNBC Thursday, Waller said, “The inflation data we got yesterday was very good,” referencing the latest figures showing a cooldown in price pressures.

Federal Reserve Governor Christopher Waller suggested multiple rate cuts in 2025 if inflation continues to show signs of cooling.

Speaking on CNBC Thursday, Waller highlighted the favorable December inflation data, which he said would support rate cuts in the first half of the year, possibly beginning as early as March.

“The inflation data we got yesterday was very good,” Waller said, referring to the latest figures that showed a decrease in price pressures.

He added that if similar inflation data continues to be reported, it would be reasonable to expect rate cuts in the first half of the year, with the possibility of a cut as early as March.

Waller also stated that future cuts could exceed current market expectations if inflation falls in line with December’s favorable data.

The two-year Treasury yield, which closely reflects Federal Reserve policy changes, dropped to 4.25% after Waller’s comments. Markets are now expecting 40 basis points of rate cuts in 2025, up from 34 basis points earlier.

However, Waller emphasized that the pace of cuts remains data-dependent. “If the data doesn’t cooperate, then you’re going to be back to two, maybe even one [cut] if we just get a lot of sticky inflation,” he said.

The labor market continues to influence the Fed’s outlook, with recent data showing steady job growth and lower unemployment at the end of 2024. Waller described the labor market as “solid, not booming.”

Bitcoin responded positively to Wednesday’s CPI release, aligning with Waller’s optimistic inflation outlook.