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The Key Takeaways
- The Federal Reserve will meet later in the month. Officials are getting ready for a discussion on whether or not to reduce their important interest rates for a 3rd time.
- Federal Reserve Gov. Christopher Waller stated this week that, despite his continued concerns over inflation, he is leaning towards a rate reduction.
- Mary Daly, president of the San Francisco Federal Reserve Bank said that she will need to examine upcoming releases before making a decision on whether or not to reduce borrowing rates.
Some officials claim that despite the markets expecting a cut in rates at the Federal Reserve’s meeting scheduled for December, they are still unsure if enough progress has been made with regard to inflation.
Federal Open Markets Committees (FOMCs) have cut their influential federal funds rates at two of its meetings. But the Fed’s December meeting is likely to be more close, since officials encouraged caution. Inflation also ticked up again in their most recent readings.
“After making a lot of progress over the past year and a half, the recent data indicate that progress may be stalling,” Waller said. “I take the recent inflation data seriously, but we saw a similar uptick in inflation a year ago that was followed by a continued decline, so I also don't want to overreact.”
The Federal Reserve cut interest rates in September. According to officials, traders are confident that central bankers won’t change their course. CME’s FedWatch, which predicts rates based on futures trades, shows that investors have priced in 75% of the chance for a quarter point cut.
What do Fed officials think about this meeting?
One Fed official appears to be in agreement with the traders.
“Based on the economic data in hand today and forecasts that show that inflation will continue on its downward path to 2% over the medium term, at present, I lean toward supporting a cut to the policy rate at our December meeting,” Christopher Waller, Governor of the Federal Reserve Bank (Federal Reserve), said this at a Washington D.C. economic conference on Monday. Christopher Waller, the Federal Reserve governor, spoke at a Washington, D.C. economic conference on Monday.
Some central banks are not so confident. San Francisco Fed President Mary Daly told Fox Business that while rates are still too high, it's not clear whether there’s been enough progress on inflation to move rates lower at the next meeting.
“In order to keep the economy in a good place, we have to continue to recalibrate policy now, whether it'll be in December or sometime later, that's a question we'll have a chance to debate and discuss at our next meeting,” Daly said. “There's more data to collect before we can really shape the forecast for next year, and that's what a data-dependent Fed looks like.”
What type of information are they seeking?
Fed officials said that Friday’s scheduled release of the November jobs report and next week’s planned Consumer Price Index data could be consequential for the debate at the Dec. 17-18 FOMC meeting.
“The path for policy will depend on the data. If we’ve learned anything over the past five years, it’s that the outlook remains highly uncertain,” John Williams, president of the New York Fed said that at a Queens Chamber of Commerce Monday event.
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