Central bankers need to watch their step when it comes time to consider lowering rates, Federal Reserve Governor Christopher Waller said. “Methodically and carefully” is the way to go, Waller added. “As long as inflation doesn’t rebound and stay elevated, I believe the FOMC will be able to lower the target range for the federal funds rate this year,” Waller said at a virtual event hosted by the Brookings Institution on Tuesday. “When the time is right to begin lowering rates, I believe it can and should be lowered methodically and carefully,” he noted. “With economic activity and labor markets in good shape and inflation coming down gradually to 2%, I see no reason to move as quickly or cut as rapidly as in the past,” he said, pointing to previous economic shocks that have precipitated rapid rate cuts.
Bottom line: Waller described current financial conditions as restrictive and said “the setting of policy needs to proceed with more caution to avoid over-tightening… I believe policy is set properly,” he said. “It is restrictive and should continue to put downward pressure on demand to allow us to continue to see moderate inflation readings.”
