Yesterday, Fed members John Williams, Christopher Waller and Raphael Bostic commented on the US economy and monetary policy. Waller signalled that he supports 25 rate cut in December, while Bostic sees current Fed policy as still restrictive. Overall, those comments were dovish, with Williams signalling further disinflation trend as a base scenario. The EURUSD pair gains today 0.26%. Here are the highlights from their speeches.
Fed’s Williams
- I expect inflation to continue to gradually ebb to 2%.
- The job market unlikely to be source of higher inflation.
- Monetary policy remains in restrictive stance.
- What the Fed does with policy depends on incoming data.
- The outlook for economy and policy remains highly uncertain.
- I expect US GDP at 2.5% this year, might be higher.
- I see unemployment rate between 4%-4.25% over coming months.
- I expect US inflation around 2.25% for 2024.
- Further progress on inflation may be uneven.
- The US economy in good place, labor market is solid, in balance
Fed’s Waller
- The labor market is finally in balance, we should aim to keep it that way.
- I am less pleased about uptick in inflation, but don’t want to overreact.
- Recent data have raised concerns that inflation progress is stalling meaningfully above 2%.
- US interest rate futures slightly raise odds of 25-bp cut this month to 70%.
- The direction of policy rate over medium term is clearly down.
- Monetary policy remains significantly restrictive.
- Still a ways to go in reducing policy rate to neutral, expects rate cuts to continue over the next year.
- I lean toward supporting a cut in December.
- The yield curve can be inverted for good reasons if markets think inflation and therefore rates will be lower in the future
- Average inflation targeting framework was very backward looking and blew up very quickly.
Fed’s Bostic
- We will have to wait and see how tariff or other policies of the new administration shape the economy; as conditions change, monetary policy will adapt.
- The economy is on solid footing, nearing price stability with labor market at or around maximum employment.
- I still think policy rate is restrictive.
- Contacts say there is not a lot of pressure to hire, but also not an expectation that the labor market is going to weaken.
- My base case is that inflation remains on track to reach 2%.
- I am not going into December meeting with a sense that the outcome is preordained, coming data will be important; keeping options open.
- It is still an open question how fast and by how much rates need to be cut to keep inflation declining while avoiding undue damage to the job market.
- Risks to inflation, employment mandates are roughly in balance, justifies a move towards neutral monetary policy.
- Uncertainties around the health of the job market, but analysis suggests it is cooling in an orderly fashion.
- I do not believe progress on inflation has stalled, though it has been bumpy.
- Data and contacts suggest economic growth is cooling and pricing power continues to diminish
EURUSD (D1)
Source: xStation5
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