Federal Reserve Governor Christopher Waller on Thursday strengthened his call for interest rate cuts, signalling that the United States central bank should begin easing next month and continue through early 2026 to shield the economy from a weakening labour market.
“Based on what I know today, I would support a 25 basis point cut at the Committee's meeting on September 16 and 17,” Waller told the Economic Club of Miami.
"While there are signs of a weakening labor market, I worry that conditions could deteriorate further and quite rapidly, and I think it is important that the FOMC not wait until such a deterioration is under way and risk falling behind the curve in setting appropriate monetary policy."
By his estimates, a neutral policy rate would sit near 3%, well below the current 4.25%-4.50% range.
"The time has come to ease monetary policy and move it to a more neutral stance", Waller said, adding he anticipates "additional cuts over the next three to six months, and the pace of rate cuts will be driven by the incoming data".
He stressed that while September’s cut should be limited to 25 basis points, that outlook could shift depending on the Labour Department’s August jobs report due next week.
Inflation, he noted, remains close to the Fed’s 2% goal, excluding temporary tariff effects.
Waller and fellow Governor Michelle Bowman dissented from the Fed’s July 30 decision to hold rates steady, citing concerns about labour market fragility.
Both were appointed by President Donald Trump and are seen as possible successors to Fed Chair Jerome Powell, who remains under pressure from the administration to lower borrowing costs.
In a further escalation of Trump’s influence over the central bank, the President this week announced the firing of Fed Governor Lisa Cook, accusing her of potential mortgage fraud. Cook has challenged the move as unlawful and is suing to remain in her position.
The Fed last reduced rates in September of last year, cutting by a full percentage point in moves that continued after Trump’s November election victory.
This year, policymakers have kept rates on hold amid fears that Trump’s tariff increases could reignite inflation, which still sits above the 2% target.
