Three Bad Narratives That Are Dead (But Will Persist)

Thank you, Jeff, and thank you to the Federal Reserve Bank of Kansas City for the opportunity to speak to you today.1 So far, 2024 has been a challenging year for economic forecasters, and for monetary policymakers. After significant progress in 2023 toward the Federal Open Market Committee's (FOMC) price-stability goal, inflation jumped in the first quarter. At the same time, both the labor market and economic growth ran strong enough that some commentators wondered whether monetary policy was restrictive enough and whether rate hikes should be back on the table. These twists and turns in the economic data shifted everyone's expectations back and forth as to when the FOMC might begin lowering its policy interest rate and how many cuts there would be this year. During this time, my consistent view was that there was no urgency to cut rates until the Committee is confident that inflation is returning sustainably to 2 percent. post: FED'S WALLER: THE TIME TO CUT POLICY RATE IS GETTING CLOSER BASED ON ANALYSIS OF POTENTIAL SCENARIOS. post: FED'S WALLER: THE OPTIMISTIC SCENARIO IS MORE GOOD INFLATION DATA, WHICH COULD MEAN INTEREST RATE CUT IN NOT-TOO-DISTANT FUTURE. post: FED'S WALLER: SECOND AND PROBABLY MORE LIKELY SCENARIO IS UNEVEN INFLATION DATA AHEAD THAT STILL SHOWS PROGRESS; THAT WOULD MAKE A RATE CUT IN NEAR FUTURE MORE UNCERTAIN. post: FED'S WALLER: THE THIRD SCENARIO, BUT WITH LOW PROBABILITY, IS SIGNIFICANT RESURGENCE IN INFLATION IN SECOND HALF OF YEAR.