Strong data will allow Fed to ‘proceed carefully’ on rates, governor says

The latest release of strong economic data will allow the Federal Reserve to “proceed carefully” as it decides on potential future interest-rate hikes, Fed Governor Christopher Waller said in a Tuesday interview. 

“That was a hell of a good week of data we got last week, and the key thing out if it is it’s going to allow us to proceed carefully,” Waller said on CNBC’s “Squawk Box.”

“We can just sit there, wait for the data, see if things continue,” he added. 

The U.S. added 187,000 jobs and the unemployment rate rose to 3.8 percent in August, according to data released Friday by the Labor Department, beating expectations of 170,000 new jobs.

The consumer price index also showed a 0.2 percent increase, a sign inflation could be slowing. The index is the Fed’s preferred method of measuring inflation.

While Waller was hopeful about the data, he cautioned against saying the job was done on interest-rate hikes, noting he wants to “see whether this low inflation is a trend or if it was just an outlier or a fluke.”

The data has boosted confidence in the markets that the Fed is likely to skip a rate hike when it meets at the meeting on Sept. 19 and 20, though Waller said future hikes were possible.

“There is nothing that is saying we need to do anything imminent anytime soon,” he said, but when asked whether rate hikes could stop, he said, “That depends on the data.”

“We have to wait and see if this inflation trend is continuing. We’ve been burned twice before. In 2021, we saw it coming down and then it shot up. The end of 2022, we saw it coming down, then it all got revised away,” he said.

He also said he thinks the economy could handle another rate hike if that’s how the Fed decides to proceed. 

“I don’t think one more hike would necessarily throw the economy into recession if we did feel that we needed to do one,” he said, noting, “It’s not obvious that we’re in real danger of doing a lot of damage to the job market, even if we raise rates one more time.”