Fed Governor Waller says 'more caution' needed on rate cuts after data showing a hot economy --[Reported by Umva mag]

• Fed Governor Christopher Waller says recent data shows the Fed should ease more cautiously.
• Waller pointed to data on employment, income, and growth, as well as sticky inflation.
• The Fed cut rates by a50-basis points last month and is expected to make a smaller cut next month.

The Federal Reserve should pump the brakes a bit after its jumbo interest rate cut, according to comments from Governor Christopher Waller on Monday.

Waller suggested future cuts will likely be less aggressive as the central bank sees signs of a hot economy.

"While we do not want to overreact to this data or look through it, I view the totality of the data as saying monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting," Waller said at a conference at Stanford University on Monday.

Waller's comments come after the Fed cut interest rates by a jumbo 50 basis points last month as it shifted its focus from fighting inflation to propping up the labor market.

Waller said recent data, though, shows an economy that's still hot.

"The data is signaling that the economy may not be slowing as much as desired," he said.

He pointed to recent data on employment, inflation, income and gross domestic product. The September jobs report showed strong employment after posting weak numbers over the summer, while inflation has proved stickier than expected with last week's consumer price index coming in slightly higher than forecasts.

Meanwhile, economic growth has been strong, with second quarter GDP up 3%, while gross domestic income was revised up from 1.3% to 3.4%.

"These revisions suggest that the economy is much stronger than previously thought, with little indication of a major slowdown in economic activity," Waller said.

Waller said he will be watching closely for any further data that shows the Fed should ease less aggressively.

"I will be watching to see whether data, due out before our next meeting, on inflation, the labor market and economic activity confirms or undercuts my inclination to be more cautious about loosening monetary policy," he said.

Waller's comments come as the recent mixed data points have fueled expectations for a "no-landing," in which the economy will continue to grow but make it harder for the Fed to cut rates as inflation stays elevated.

Traders will be eagerly watching the upcoming September retail sales data, due Thursday, for further signs of a no-landing if Americans' spending comes in strong.

Markets are currently pricing in a 25-basis point cut at the Fed's November meeting, with a smaller chance the central bank leaves the target rate unchanged, according to the CME FedWatch tool. Investors expect cuts totaling about 125 basis points next year.

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