Last month, Governor Christopher J. Waller of the Federal Reserve delivered a speech titled “Something’s Got to Give,” reflecting on the current economic conditions. Waller highlighted a contradiction between robust economic growth and employment data in the third quarter and a moderating pace in core personal consumption expenditures (PCE) inflation. He emphasized that for inflation to reach the Federal Open Market Committee’s (FOMC) 2 percent target, economic momentum might need to decelerate.
In recent weeks, data suggested an easing of economic activity, aligning better with inflation reduction goals. Although core PCE inflation had risen slightly in September, recent figures indicate a positive shift towards lower inflation rates in October. However, Waller cautioned that it is premature to confirm if this slowdown is sustainable, though he expressed confidence in current policies potentially guiding inflation back to the desired level.
Governor Waller remains cautiously optimistic about the initial signs of economic moderation but maintains a vigilant outlook due to the persistent high inflation rates. He expressed hope that forthcoming data would clarify whether further policy adjustments are necessary to stabilize prices effectively. Waller’s speech underscores the delicate balance the FOMC must maintain in steering economic policy to nurture growth while curbing inflation, emphasizing the complex interplay of various economic indicators in shaping future monetary policy decisions.