By Greg Robb
Fed governor doesn’t favor a 50-basis-point cut in September, at least not yet
Federal Reserve governor Christopher Waller wanted the Fed to lower rates last month.
Federal Reserve governor Christopher Waller on Thursday said he now supports a series of interest-rate cuts beginning in September, with the pace of subsequent moves driven by the incoming data.
Waller had urged the Fed to cut rates at its last meeting in July, and he said he is more sure now that it was the right call.
“Let’s get on with it,” Waller said Thursday at an event in Miami.
The White House has said Waller is among the list of candidates who will be interviewed for the job to replace Federal Reserve Chair Jerome Powell, when Powell’s term ends in May.
President Donald Trump has been insisting for months that the Fed should be lowering rates quickly. He has belittled Powell almost daily and publicly toyed with the idea of firing the Fed chief.
Earlier this week, Trump took the unprecedented step of firing a sitting Fed governor, Lisa Cook, seeking to overturn laws and traditions that have kept the central bank independent from White House control. Analysts said the move is primarily aimed at giving Trump the opportunity to put supporters of his policy goals on the Fed’s interest-rate committee. Cook has gone to court to block her firing, calling it unlawful.
In his remarks to the Economic Club of Miami on Thursday, Waller didn’t mention Trump. He declined to comment on Cook and her legal fight.
The Fed governor said he favors rate cuts because he’s worried the labor market is weaker than it looks on the surface.
Waller said a weekly picture of the jobs market the Fed creates using data from ADP suggests the weakness seen in July job report continued into this month.
Waller also said that inflation from tariffs will be temporary and therefore the Fed doesn’t need to hold rates higher than normal to guard against another outbreak of steadily rising prices.
Over the first seven months of the year, Powell backed a policy of keeping rates higher than normal to guard against an outbreak of inflation, which has been above the Fed’s target for four years.
In his speech last week in Jackson Hole, Wyo., Powell opened the door for a rate cut in September, but stressed the Fed needed to ease carefully.
It is possible other Fed officials may dissent from a rate cut in September. Only two months ago, seven Fed officials said they thought the Fed should not make any cuts this year. Only one other Fed official, Fed governor Michelle Bowman, backed Waller’s call for a July rate cut.
The Fed’s benchmark interest rate is now in a range of 4.25% -4.5%. A survey of Fed officials indicates that a normal, or “neutral,” setting of rates is around 3%. That is the estimated level where rates are not boosting growth or dampening activity.
Using that math, Waller said interest rates can be 125-150 basis points lower than the current setting.
“The totality of the data and the outlook will determine how quickly I believe we need to move policy to a neutral setting, but as I stand here today, I anticipate additional cuts over the next three to six months, and the pace of rate cuts will be driven by the incoming data,” Waller said.
Waller added he doesn’t currently support a 50-basis-point cut at the Fed’s meeting on Sept. 16-17, but added he might change his mind if the August jobs report points to a substantially weakening economy and inflation remains well-contained. The jobs data will be released on Sept. 5, with the inflation data coming the following week.
-Greg Robb
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08-28-25 2158ET
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