Fed Governor Waller describes US GDP growth in the third quarter as a “huge” number that warrants monitoring by Reuters

Fed Governor Waller describes US GDP growth in the third quarter as a “huge” number that warrants monitoring by Reuters

By Howard Schneider and Lindsay Dunsmuir (NYSE:LNN)

WASHINGTON (Reuters) – Federal Reserve Governor Christopher Waller said on Tuesday that the US economy’s growth in the third quarter at an annual rate of 4.9 percent was a “strong” performance worth monitoring as the Federal Reserve considers its next policy moves. .

“This was a great quarter… this big number,” Waller said at an economic data seminar at the Federal Reserve Bank of St. Louis. Looking at the components of US output, “everything has been buoyant. So that’s something we’re watching closely as we think about policy moving forward.”

US central bank officials, including Federal Reserve Chairman Jerome Powell, have said they feel the US needs a period of weak economic growth for inflation to cool from the current level of around 3.4%, based on the Fed’s preferred measure, to a target Central Bank of 2%.

Many economists and investors feel an economic slowdown is likely to occur, and they largely expect the Fed to keep interest rates steady at its policy meeting scheduled for December 12-13.

Waller, who has been among the Fed’s most ardent advocates of raising interest rates to combat high inflation, did not include a policy recommendation in his remarks.

But he noted that after a string of “astonishing” job growth, “the labor market is cooling down a little bit…and it’s clearly cooling off,” with recent job growth in line with levels seen before the coronavirus pandemic, which the Fed’s development bank represents. Policymakers also feel it is necessary for inflation to return to the 2% target.

The Fed is studying this and other data to determine whether it is necessary to raise its benchmark overnight interest rate beyond the current range of 5.25% to 5.50% that was set in July.

In contrast to the economic growth seen in recent months, rising long-term bond yields have some Fed officials feeling that credit conditions may be tight enough that the central bank will no longer need to raise its short-term interest rate.

In separate comments to CNBC on Tuesday, Chicago Fed President Austan Goolsbee noted that inflation is slowing, and that the rise in market-based interest rates, “if…continued at high levels” likely represents a tightening of credit conditions.

“Then we have to take that into account… We should expect to see that as the lag makes its way through the economy. So we’re all paying attention and trying to figure out what the driver is,” Goolsby said.

The Fed’s current cautious approach to any further interest rate increases has been reinforced by rising bond yields and rising market interest rates.

But neither Goolsbee nor Minneapolis Fed President Neel Kashkari, who spoke to Bloomberg TV on Tuesday, ruled out raising federal interest rates again.

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Pointing, as Waller did, to the recent “hot” readings on economic activity, Kashkari said, “It makes me wonder if policy is as tight as we assume at the moment.”

“If you see inflation rising again and you see very strong economic activity in the real side of the economy, that will tell me that we may need to do more,” Kashkari added.

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