(Bloomberg) -- Federal Reserve Governor Christopher Waller said favorable inflation data, and not worries about the labor market, are what convinced him to support policymakers’ decision to lower interest rates by a half percentage point this week.
“What’s got me a little more concerned is inflation is running softer than I thought,” Waller said Friday in an interview on CNBC.
The Fed governor said he’s now estimating that the Fed’s favored gauge of inflation — the personal consumption expenditures price index — has risen over the last three months at an annualized rate of less than 1.8%, which is below the Fed’s target of 2%.
Waller’s remarks come two days after the Fed surprised many economists by making an aggressive start to a new easing cycle for monetary policy. Policymakers also released projections signaling a slim majority favored cutting rates by an additional half-point over their two remaining sessions this year.
Waller said he’d likely back quarter-point cuts at each of the next two Fed policy meetings, in November and December, if the economy evolves as he expects.
“If labor market data worsens, or if the inflation data continues to come in softer than everybody was expecting, then you can see going at a faster pace,” he said, before adding that a fresh pickup in inflation could also cause the Fed to pause its cutting.
In an Aug. 23 speech, Fed Chair Jerome Powell signaled policymakers would begin lowering rates in September and that worries over a softening US labor market could push them to move aggressively.
(Updates with additional Waller comments from third paragraph.)
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