Federal Reserve Governor Christopher Waller hinted at multiple rate cuts in 2025 if inflation continues its current disinflationary trend.
Speaking on CNBC Thursday, Waller said, “The inflation data we got yesterday was very good,” referencing the latest figures showing a cooldown in price pressures.
He added that if similar inflation data continues to be reported, it would be reasonable to expect rate cuts in the first half of the year, with the possibility of a cut as early as March.
Waller also suggested that future cuts could exceed current market expectations if inflation falls in line with December’s favorable data.
The two-year Treasury yield, which closely reflects Federal Reserve policy changes, dropped to 4.25% after Waller’s comments. Markets are now expecting 40 basis points of rate cuts in 2025, up from 34 basis points earlier.
Waller cautioned that the pace of cuts remains data-dependent. “If the data doesn’t cooperate, then you’re going to be back to two, maybe even one [cut] if we just get a lot of sticky inflation,” he said.
The labor market continues to influence the Fed’s outlook, with recent data showing steady job growth and lower unemployment at the end of 2024. Waller characterized the labor market as “solid, not booming.”
Bitcoin responded positively to Wednesday’s CPI release, aligning with Waller’s optimistic inflation outlook.
The asset briefly surpassed the $100,000 resistance level and has been trading between $98,000 and $100,000 over the past 48 hours, with Bitcoin still struggling to break and hold above the $100,000 mark.
This level, a psychological barrier since Bitcoin first reached it in early December, had proven difficult to sustain. Earlier this week, Bitcoin fell below $90,000, but the better-than-expected inflation data reignited bullish sentiment, driving the price upward once again.
Bitcoin’s market dominance has decreased to 57% since Monday. Alternative digital assets have posted gains, with Solana rising 8% and XRP increasing 15% over the past 24 hours.
Meanwhile, the DXY remains on a downward trend but is still higher than levels from a month before Donald Trump’s election victory.
Many expect the DXY to drop once Trump takes office, as was observed during his first term after the 2016 election, when it initially rose before declining in 2017.
