It is urgent to wait before initiating a reduction in the key rates of the American Federal Reserve (Fed), as long as inflation data does not show “a sustained trajectory” towards the 2% objective, a one of its officials said on Wednesday.
We have had a lot of progress in terms of reducing inflation over the past year, but the data from the last two months have been disappointing, said Christopher Waller, one of the governors of the Fed, in a speech in New York.
In these conditions, even if it is obvious to him that a reduction in rates will have to take place at a given moment, I am not ready to go in this direction as long as progress does not materialize, he noted.
It is therefore necessary, according to him, to reduce the number of reductions or to postpone them until next year rather than rushing, taking into account recent data.
Inflation has in fact slowed less quickly than expected since the start of the year, with the CPI index, on which pensions are indexed, having even rebounded in February, to 3.2% over one year, compared to 3.1% in January (a figure already higher than expected).
As for the PCE index – favored by the Fed which wants to bring it back to 2% – it will be published on Friday for February, but in January had slowed down over a year, to 2.4% compared to 2.6%, and accelerated over a month, 0.3% versus 0.1%.
The Fed, which met last week, still plans to reduce the cost of credit three times this year, despite this rebound in inflation.
But we will have to wait to see the movement start, and, at this stage, it has kept its rates unchanged, at the highest in more than twenty years, in the range of 5.25% to 5.50%.
The markets anticipate a further maintenance of rates at the next meeting, scheduled for April 30 and May 1, but a first cut from the next one, mid-June, with two other cuts expected before the end of the year, according to the FedWatch monitoring tool from CME Group.
Christopher Wallen, however, is more cautious, saying he needs to see at least several months of better inflation data before having enough confidence to initiate a rate cut to keep the economy on an upward trajectory. inflation 2%.