Key insights
- Fed Governor Waller initially considered dissenting for a rate cut after the February jobs report but shifted due to rising inflation concerns, particularly related to the Strait of Hormuz closure and potential oil price impact. He emphasized caution but remains open to rate cuts later if the labor market weakens, signaling a data-dependent approach and potential for tighter monetary policy in the near term, which is bearish for equities.
Investing.com -- Federal Reserve Governor Christopher Waller said Friday he was prepared to dissent in favor of a rate cut following the February jobs report, but growing inflation concerns changed his stance.
Speaking to CNBC’s Steve Liesman, Waller said the inflation picture has deteriorated and become more worrying because the Strait of Hormuz remains closed two weeks after the initial closure.
The Fed governor noted there are reasons to believe the breakeven payroll number could be very low, adding that while his brain understands the math, he cannot reconcile it emotionally.
Waller said the closure of Hormuz suggested more inflation pressure ahead, and that oil prices can bleed through to core inflation at some point.
The Fed official emphasized that exercising caution now does not mean the central bank will stay put for the rest of the year. He said he does not know where the situation will go, but caution is warranted.
Waller added he would advocate for rate cuts again later in the year if labor market conditions weaken.
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