christopher j waller : what's the rush? speech by mr christopher j waller, member of the board of governors of the federal reserve system, at the finding forward speaker series, university of st. thomas, opus college of business, minneapolis, 22 february 2024. * * * thank you, dean dunham and the university of st. thomas for the opportunity to speak to you today. 1 given that this event is co - sponsored by the notre dame club of minnesota, and i taught at notre dame for 13 years, i will lead off with this thought : go irish! when i last spoke on january 16, the data we had received up to that point was very good - three - and six - month measures of core personal consumption expenditures ( pce ) inflation were running right at 2 percent, which is our goal for total inflation, the labor market was cooling but still healthy, and real gross domestic product ( gdp ) was likewise growing but expected to moderate in the fourth quarter. i argued then that the data was " almost as good as it gets. " and i argued that because the economy was doing so well, we could take our time and collect more data to ensure that inflation was on a sustainable 2 percent path. there was no rush to cut rates any time soon. since then, we received data on fourth quarter gdp as well as january data on job growth and consumer product index ( cpi ) inflation. all three reports came in hotter than expected. gdp growth came in at 3. 3 percent, well above forecasts. jobs grew by 353, 000, well over forecasts of less than 200, 000, and monthly core cpi inflation came in at 0. 4 percent, which was much higher than it had been for the previous six months. so, the data that we have received since my last speech has reinforced my view that we need to verify that the progress on inflation we saw in the last half of 2023 will continue and this means there is no rush to begin cutting interest rates to normalize monetary policy. last week's report on consumer prices in january was a reminder that ongoing progress on inflation is not assured. the uptick in inflation in that report was spread widely among goods and services. this one month of data may have been driven by some odd seasonal factors or outsized increases in housing costs, or it may be a signal that inflation is stickier than we thought and will be harder to bring back down to our target. we just don

financial markets and financial intermediaries. returning the economy to equilibrium requires actions more befitting than changes in the federal funds rate alone. the lending facilities created and employed by the fed are likely proving useful in this regard. increasing liquidity by having a central bank lower the federal funds rate can reduce the risk of a more severe financial crisis, but is imperfectly suited to compensate for declines in liquidity arising from retrenchment in the financial sector for long periods. 12 as policymakers, we strive to distill truths about how the conduct of monetary policy, the transmission mechanism of financial markets, and other determinants – domestic and foreign – affect real economic activity. in my remarks today, i tried to expound not only on what we know, but also on what we don't. successful economies are dynamic and flexible. their citizens respond to changes in policy preferences, financial conditions, and global forces. central bankers must seek a better understanding of an economy's changing fundamentals, distilling lessons learned and aspiring to reduce monetary policy to a science. in the interim, the art of monetary policy rightly will predominate. in my view, only when private financial agents resume their role as the primary source of liquidity in markets will proper credit market functioning and support for economic growth be restored. ( see warsh ( 2008 ) in footnote 10. )