Fed's Waller: No rush to cut rates

Let’s kick off last call tonight with some breaking news. A short time ago, Fed Board Governor Christopher Waller made some significant comments at the Economic Club in New York City. His remarks come as the S&P 500 hit a record close today and the Dow finished within striking distance of 40,000. CBC senior economics reporter Steve Liesman has been following Waller speech and joins us now with more. What did you learn, Steve? Yeah, contest just real quick. I’m looking at the futures right now and they’re a little bit off of those highs after Waller started speaking. And the reason is because speaking at the Economic Club of New York, he gave a pretty hawkish remarks about the outlook for rate cuts, especially if you’re looking for near term rate cuts. He says recent strong economic data, as well as lack of progress and inflation, has reinforced his view that there’s no rush to cut the policy rate. He says it’s prudent to hold the rate at a restrictive level for quote longer than he previously thought, and he’s not ready to cut. Until inflation progress materializes, it’s appropriate to reduce the overall number of cuts or push them further into the future. In response to the recent data. The risk of waiting a little longer to cut rates is significantly lower, he says, than the risk of acting too soon. He notes that the dot plot shows three cuts expected by the Fed quote, but the dots have moved up, something we’ve been reported reporting for quite some time now. The committee says it’s not overreacting to the data, but it’s not discounting it either. I think we have a a bit of the sound of Fed Governor Waller talking at the Economic Club of New York. Let’s give a listen. In the absence of an unexpected and material deterioration in the real economy, I’m going to need to see at least a couple of months of better inflation data before I have enough confidence that beginning to cut rates will keep the economy on a path to 2% inflation on inflation, Waller said. The progress has quotes, stall, slowed and may have stalled. He’s uncertain about the speed of continued progress on inflation right now because of the last two months of data we’ve had. He does not expect the February PCE. We get that number on Fridays. The feds preferred inflation indicator to show much progress towards 2% inflation. Wallace’s progress on inflation will be uneven, but he’s still optimistic. It’s likely continue down to 2%. He’s not ruling out rate cuts. He still thinks inflation progress will make it appropriate for the Fed to cut rates this year. So I’ll leave it there. He’s upbeat on the economy. He’s 2% growth, actually calls it a remarkable economy. Oh, and just a couple other things here. He talked about the recent job gains. Let me just go to the very end here, guys, and and tell you a couple other things that he said. He talked about the Baltimore boating accident and he said that it was the accident was unlikely to have a major impact on the economy or inflation. He also said when it came to rate hikes, he says. We sort of joked we’d have to see a very big change in inflation, Contessa in order to reverse course or begin hiking rates. I’ll leave it there. Yeah, it’s interesting. I’ve got some, some of my own reporting there on the economic impact of the bridge collapse. We’ll get to that a little bit later in last call. But in the meantime, Steve, I if you’ll stay with us, we want to get some reaction now from our leadoff panel. Joining us now is Kobe, AC Letter Editor in Chief Adam Kobesi and Hightower Chief Investment Strategist, CNBC contributor, Stephanie Link. It’s good to have you joining in the conversation. Adam, is that about what you expected from Waller? Yeah, absolutely. I think I I’ve been saying this now even on on the show the Fed would rather cut, you know, too late and risk slight economic weakness and cut too soon and risk resurgence of inflation. Waller basically just said that word for word. And right now it’s not clear was you know where the last couple of months of rising inflation data, where they have pothole, where they have speed bump as Waller said directly, we don’t know. We need to see more data before we can start cutting rates here. CNBC has a survey of top investors here with the probabilities that this would happen. There you’re seeing the probability of when rate cuts will happen. I want to show you how many times in 2024 these 400 or so top investors were surveyed by CNBC. It shows that 26% think that we’ll get three rate cuts, 61% think we will get two rate cuts, and 13% think we’ll get one rate cup. But nobody thinks we’re going to get more than three and nobody thinks we’re going to get none at all. Stephanie, what’s your view on how much of what Waller says is kind of already priced in? Yeah, absolutely. I mean, on the good news side, GDP is better than expected and that’s what Powell said last week and that’s definitely what Waller said tonight. And we understand that they are all waiting for inflation to make even more progress. Let’s be real though, We have made real progress. The CPI peaked at 9.1% and we are now at 3.2. I know they look at 4 PCE and we get that on Friday, but we are well below the 5.57% number in the peak for PCE. Is that in the twos, 2 1/2 threes. But I don’t know. We’ll see on Friday, but we are definitely making progress. And then to your question about what do I see in terms of the Fed, what they’re going to do? I don’t even know if it’s going to have a material impact one or two or three on the overall economy because we raised so much. It’s really more just a signal for investors. It’s a signal that they’re starting to realize that we we can’t, we don’t have to be this restrictive and that’s all very good, good news. One last point on inflation, we have seen home prices fall six months in a row, down 7.4% year over year. We know that rents follow home prices and rents have been the sticky part of inflation. That is good news that home prices are coming down because I think that rents are going to be coming down in a couple of months time.