Fed's Hawkish Stance: Underlying Inflation Remains Too High for Rate Cuts

Federal Reserve Governor Christopher Waller emphasized that underlying inflation remains too high to consider cutting interest rates in the near term. Speaking at an economic forum, he noted that core inflation, which excludes volatile food and energy prices, is still running above the Fed's 2% target.

The pace of disinflation has slowed, according to Waller, who pointed to persistent price pressures in services and shelter as key contributors. He warned that premature easing could undo the Fed's credibility in fighting inflation.

The market reaction was immediate, with futures markets trimming bets on a rate cut at the Federal Reserve's next policy meeting in March. The probability of a quarter-point cut fell to around 30%, down from 40% a week earlier.