Christopher Waller testifies before the Senate Banking, Housing and Urban Affairs Committee during a hearing on their nomination to be member-designate on the Federal Reserve Board of Governors on February 13, 2020 in Washington, DC.
Sarah Silbiger | Getty Images
Federal Reserve Governor Christopher Waller said Wednesday he's open to reducing the level of interest rate increases soon, so long as the economic data cooperate.
The rate-setting Federal Open Market Committee is set to meet Dec. 13-14. Market expectations are running high that policymakers will approve another rate hike, but this time opting for a 0.5 percentage point, or 50 basis point, move. That would come after approving four consecutive 0.75 percentage point increases.
"Looking toward the FOMC's December meeting, the data of the past few weeks have made me more comfortable considering stepping down to a 50-basis-point hike," Waller said in prepared remarks for an event in Phoenix. "But I won't be making a judgement about that until I see more data, including the next PCE inflation report and the next jobs report."
The next PCE inflation report is due out on Dec. 1.
Investors have grown optimistic that a lower-than-expected increase in October's consumer price index reading is indicative that inflation is cooling. Headline CPI increased 0.4% for the month and 7.7% from a year ago, while the core reading excluding food and energy rose 0.3% and 6.3%, respectively. All the readings were lower than market estimates.
The Fed favors core personal consumption expenditures prices, which rose 0.5% in September and 5.1% from a year ago, as a gauge of rising prices.
Waller said he'll be watching the data closely as he remains suspect that the October CPI readings confirmed a new trend. As a governor, he is an automatic voter on the FOMC.
"Though welcome news, we must be cautious about reading too much into one inflation report. I don't know how sustained this deceleration in consumer prices will be," he said. "I cannot emphasize enough that one report does not make a trend. It is way too early to conclude that inflation is headed sustainably down."
In making his assessment, Waller said he will be looking at three principal data points apart from the broad inflation readings: Core goods prices, housing and non-housing services. He said he's seeing encouraging signs on all three fronts but will need to see more and vowed not to be "head-faked by one report."
"Like many others, I hope this [CPI] report is the beginning of a meaningful and persistent decline in inflation. But policymakers cannot act based on hope," he said.
Earlier in the day, San Francisco Fed President Mary Daly told CNBC that she expects at least another percentage point of rate increases ahead. The Fed's benchmark rate currently sits in a targeted range between 3.75% and 4%.