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Federal Reserve Governor Christopher J. Waller has underscored the resilience of the U.S. economy while expressing caution regarding monetary policy adjustments. Speaking at the Economic Club of New York, Waller highlighted the need for further observation of economic indicators before considering any rate cuts, given the recent mixed data on inflation and growth.
Waller reiterated the Federal Open Market Committee's (FOMC) commitment to reducing inflation to a sustained level of 2 percent while ensuring a healthy labor market. Despite significant progress made in 2023, recent economic data has raised uncertainties about the pace of continued improvement, prompting Waller to emphasize a patient approach in normalizing monetary policy.
While first-quarter growth forecasts indicate a slowdown compared to the latter half of 2023, consumer spending remains a significant factor. Retail sales fluctuations suggest a moderation in goods spending, although services spending shows moderate growth, mitigating some declines.
Amid robust job gains, Waller noted a mixed message regarding supply and demand dynamics. While payroll data indicate strong employment figures, the rise in the unemployment rate and a decrease in job quits suggest a slight loosening in the labor market.
Waller addressed recent productivity growth, cautioning against overestimating its sustainability. He emphasized the need to differentiate between short-term boosts and long-term growth drivers, expressing skepticism about the continuity of recent productivity trends.
Acknowledging recent data-driven adjustments by financial markets and forecasters, Waller stressed the importance of reacting appropriately to economic indicators without overreacting. He emphasized the need for sustained progress in inflation reduction before considering any rate cuts, citing the ongoing strength of the U.S. economy.
Source: Federal Reserve press release
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