FED: Gov Waller: Faster GDP Growth Not Inflationary; Fed Independence Crucial

Gov Waller indicates in Q&A that he's forecasting GDP growth of 1.6% this year and 2.5% in 2026 (vs FOMC medians 1.7% / 2.3%), and that supply-side improvements mean that stronger growth will not translate into stronger inflation (an argument advanced by the Trump administration as well as some of Waller's FOMC colleagues such as Gov Miran). As such, rates can come down further in his core view, though he emphasizes that there is "no rush" to ease:

• "I think inflation is still going to start coming down the first half and year towards our target, and we can continue to cut rates. Just on that alone. There's no reason we have to cut keep rates high just because there's positive growth in the economy. That doesn't cause inflation, per se. But because inflation is still up, we can take our time. There's no rush to get down. And so that's my view, is we just can steadily, kind of bring the policy rate down towards neutral. Keep an eye on inflation, and I'm not too worried about, you know, if growth is two and a half percent [next] year, which is above our kind of long run estimate, I don't view that as being overly stimulative to inflation."

On his interview for Fed Chair later today, Waller is asked about whether he will emphasize to President Trump the importance of Fed independence - he says "absolutely", but "The one thing everybody always forgets is central bank independence is there's another side of it, which is accountability. There's no institution in this country that is unaccountable to the electorate that's what people often forget, is that we want central bank independence to be free of political interference, but we still have to be accountable to the American public".

• He argues that independence also doesn't necessarily mean the Fed Chair doesn't communicate with the Executive Branch: "The President makes himself very clear on Truth Social his views on policy and what they should be, I don't think there's any confusion about it... I know in the past, Fed Chairs have talked to the President at certain times, but in times of crisis, and that is when you should have a coordinated response to things... the Fed chair and the Secretary of the Treasury have breakfast every two weeks, you know? So that's that's a normal chain of communication where information is passed from the White House to the Chair about what the administration's views are. I think that's a typical channel of communication that's well understood, and I don't think there's anything wrong with continuing that channel."