A top Fed official leans toward December rate cut but says it depends on economic data

WASHINGTON (AP) — A top Federal Reserve official said Monday that he is leaning toward supporting an interest rate cut when the Fed meets in two weeks but that evidence of persistent inflation before then could cause him to change that view.

Speaking at George Washington University, Christopher Waller, a key member of the Fed's Board of Governors, said he was confident that inflation is headed lower and that the central bank will likely keep reducing its key rate, which affects many consumer and business loans.

But he noted that there's a risk that inflation “may be getting stuck above” the Fed's 2% target, which would support an argument for keeping the Fed's rate unchanged this month.

“At present, I lean toward supporting a cut to the policy rate at our December meeting," Waller said in his remarks to a conference held by the American Institute for Economic Research. "But that decision will depend on whether data that we will receive before then surprises to the upside and alters my forecast for the path of inflation.”

Waller's caution reflects a notable shift in the economic and inflation outlook in the past month or so. Growth in consumer spending and the broader economy was robust in the July-September quarter. In addition, inflation picked up in October after having slowed for most of this year.

And Donald Trump's election victory has raised the prospect of widespread tariffs and mass deportations of migrants, both of which could elevate inflation. Some economists say they think the Fed might decide to cut its rate more slowly to allow time to evaluate the effects of Trump's policies.

With inflation having steadily fallen from its peak in 2021, the Fed reduced its key rate by a half-point in September and by a quarter-point in November. And it signaled in September that it expected to announce another quarter-point cut this month. Yet inflation has remained above the Fed's target level, clouding the Fed's next step.

Waller stressed that if future economic reports showed inflation or growth deviating from the Fed's expected paths, he could favor keeping rates unchanged this month.

“If the data we receive between today and the next meeting surprise in a way that suggests our forecasts of slowing inflation and a moderating but still-solid economy are wrong, then I will be supportive of holding the policy rate constant,” he said.