Waller Signals Fed is Open to Bigger Cuts

Federal Reserve Governor Christopher Waller stated today that the current economic indicators suggest the need for action, indicating that the Federal Reserve is prepared to reduce interest rates.

During his address at the University of Notre Dame, Waller referred to the latest employment figures as a sign that the labor market is beginning to align with moderate economic growth. “Today’s job report continues the long-term trend of a weakening labor market that corresponds with moderate growth in economic activity,” he remarked.

He further clarified, “Although the labor market has evidently slowed down, I do not believe the economy is in recession or is on the immediate path to one.” Waller emphasized that any decision to cut interest rates would depend on the data, rather than any preconceived ideas about the timing or manner of Federal Open Market Committee actions.

Waller noted that the August job data, released recently, illustrates the ongoing trend of a cooling labor market, which aligns with his views on moderate economic growth. He mentioned the possibility of ‘front-loading’ rate cuts, indicating that the Federal Reserve might consider reducing rates by 50 basis points in the forthcoming September meeting.

Despite the observed cooling in the labor market, Waller does not view the economy as being in recession or on the brink of one shortly. His comments come at a time when the Federal Reserve is closely examining economic indicators to determine the best approach to monetary policy.

Analysts from Vital Knowledge remarked that Waller’s comments reflected a dovish outlook similar to that of Fed Chair Powell at the recent Jackson Hole symposium. They noted that the Fed has clearly adjusted its stance in light of the cooling in employment and inflation. While Waller did not commit to a specific rate cut ahead of the September meeting, the expectation for a 50 basis point reduction seems likely.

Citi economists echoed this sentiment, predicting that the Fed will proceed with a 50 basis point cut in September, even as market concerns grow about the potential for a recession.