MNI BRIEF: Fed's Waller: Need Lower Rates To Strengthen Jobs

Federal Reserve Governor Chris Waller said Friday he dissented in favor of a quarter-point rate cut this week to head off the significant risk of substantial deterioration in the labor market. 

"I favored reducing the policy rate to strengthen the labor market and guard against a deterioration that would be harder to address once it has begun," he said. "Three cuts to the policy rate last year have moved it closer to a neutral setting but monetary policy is still restricting economic activity, and economic data make it clear to me further easing is needed." 

The current fed funds rate target at 3.5%-3.75% remains 50 to 75 bps above the median FOMC estimate of neutral at 3%. 

Inflation excluding tariff effects is running close to the Fed's 2% target and on a path to sustainably reach that goal, Waller said. On the other hand, annual revisions will likely show there was virtually no job growth in 2025, compared to the prior 10-year average of 1.9 million new payrolls a year, he said. 

"I have heard in multiple outreach meetings of planned layoffs in 2026. This indicates to me that there is considerable doubt about future employment growth and suggests that a substantial deterioration in the labor market is a significant risk." (See: MNI INTERVIEW: Fed On Hold For At Least Next Few Months-George)