• The Federal Reserve has raised its benchmark lending rate six times this year, including four 0.75-point jumps.
• In June, the US annual inflation rate reached 9.1%, the highest level in four decades.
• Waller noted a “widespread” price downturn, including a decrease in services costs.

Recent evidence of lessening inflation pressures and a sluggish US economy could allow the Fed to delay rate hikes, Federal Reserve Governor Christopher Waller said.

The Fed has raised its benchmark lending rate six times this year, including four 0.75-point jumps.

Positive data “have made me more comfortable considering stepping down to a 50-basis-point hike” in December, Waller said, though he cautioned that more rate hikes are still needed to bring inflation down.

His comments come after figures showed inflation fell in October, with the consumer price index recording its lowest annual pace since January.

This year, Russia’s war in Ukraine has caused food and fuel costs to skyrocket, and in June, the US annual inflation rate reached 9.1%, the highest level in four decades.

Waller noted a “widespread” price downturn, including a decrease in services costs and the first reduction in core goods prices since March.

However, he emphasized that “one report does not form a trend” and that it is too early to declare that prices are on a downward trend that is sustainable.

In his prepared remarks for a conference in Phoenix, Arizona, he stated, “More interest rate hikes are needed to get inflation down.”

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Still ‘significant’

In spite of the fact that inflation remains well above the Fed’s target of 2%, a rising number of voices are arguing for modest steps in the coming months.

Fed Vice Chair Lael Brainard said it would be “appropriate shortly” to moderate the pace of interest rate hikes, but more steps are needed to battle inflation.

She underlined that Fed policy actions will take time to affect the economy and that a “deliberate” pace will allow authorities to examine the data.

Fed policymakers walk a tightrope as they attempt to reduce prices while avoiding a recession.

The measures of the central bank have reverberated across the economy, with the interest-sensitive housing sector slowing the most.

Additional rate hikes are anticipated to reduce consumer and company expenditures, making saving more appealing than spending.

Waller said even if the FOMC switched to a half-point step in December, “this would still be a fairly significant tightening action,” and the final path will depend on the economy.

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