Federal Reserve Governor Christopher Waller expressed his support for a 25 basis point rate cut in September during a speech in Miami on Thursday, August 28. He emphasized that it is now time to “ease monetary policy and move toward a neutral stance.” Waller also warned that if the August employment data shows a “rapid deterioration” in the economy, he may support a larger rate cut.
Waller reiterated his support for a 25 basis point rate cut in September at the Economic Club of Miami’s speech.
“Based on the information I currently have, I will support a 25 basis point rate cut at the rate decision meeting to be held on September 16-17,” Waller said.
“While there are signs of weakening in the labor market, I am concerned that the situation may further develop, even deteriorate rapidly. I believe that the FOMC (Federal Open Market Committee) cannot wait for this deterioration to occur before taking action, and cannot risk falling behind in monetary policy.”
Looking ahead to future policies, he stated, “I fully expect there will be more rate cuts in the next three to six months, with the pace of rate cuts being driven by upcoming data releases.”
According to Waller, the Federal Open Market Committee’s estimate of the “neutral rate” (the rate that neither stimulates nor restrains the economy) is around 3%, which is 1.25 to 1.5 percentage points lower than the current policy rate range (4.25% to 4.5%).
Waller warned that the employment market is showing signs of fatigue. He noted that the average non-farm payroll growth from May to July was only 35,000 jobs, which may even show a shrinkage after adjustments.
He also pointed out another sign of weakness in the labor market, highlighting that the unemployment rate for certain groups more sensitive to economic cycles, such as teenagers, has sharply risen back to weaker levels seen in the mid-2010s. Many businesses have delayed hiring due to the uncertain costs of tariffs and use of artificial intelligence (AI), with some entry-level positions showing a “frozen” hiring trend.
Regarding inflation, he emphasized the need to look beyond the effects of tariffs, as tariffs will only “temporarily push up inflation.” Excluding the impact of import tariffs, core inflation still remains close to the FOMC’s 2% target.
He added that most forecasts indicate that the effects of tariffs will gradually fade by early 2026, stating that “appropriate risk management means the FOMC should start cutting rates now.”
Waller said, “I believe there is a growing consensus for looser monetary policy, and some even recognize that starting this process in July would be a wise move.”
Both Waller and Federal Reserve Governor Michelle Bowman opposed maintaining interest rates at the July rate decision meeting, advocating for an early rate cut. Both were appointed by President Trump and are seen as potential successors to Federal Reserve Chair Jerome Powell.
Lately, President Trump has increased his influence on Federal Reserve interest rate decisions. Citing possible involvement in mortgage fraud, he dismissed Federal Reserve Governor Lisa Cook from her position. Cook has filed a lawsuit in the Washington District Court questioning the legality of this move.
Furthermore, after the July employment report showed a significant slowdown in the labor market, Trump also dismissed current Bureau Director Erika McEntarfer, citing “data manipulation” as the reason for her removal.