MNI: Fed’s Waller Calls For Series Of Interest Rate Cuts 

Federal Reserve Governor Chris Waller said Thursday it’s time for policymakers to lower interest rates in coming months in order to support a job market that he described as increasingly weaker. 

"I anticipate additional cuts over the next three to six months, and the pace of rate cuts will be driven by the incoming data,” said Waller in a speech entitled “Let’s Get On With It.”

Waller indicated he thinks policymakers could have quite a way to go before rates are closer to neutral levels that neither stimulate nor slow growth. “Based on the median of FOMC participants’ estimates of the longer-run value of the federal funds rate, neutral is 125 to 150 basis points lower than the current setting,” said Waller.

A cut larger than 25 basis points is not needed in September, he added. "That view, of course, could change if the employment report for August, due out a week from tomorrow, points to a substantially weakening economy and inflation remains well contained," he said. 

Fed Chair Jerome Powell signaled last week a rate cut is likely in September, but made clear any additional moves would be conditional on data. (See MNI POLICY: Fed Takes Measured Approach To Post-September Cuts) 

Waller, a contender to replace Jerome Powell as Fed chair, appears to favor a more consistent and methodical approach to cutting.  He said his July meeting dissent in favor of a quarter point rate cut was the right call.

LABOR MARKET RISKS BUILD 

“Since I last spoke on the economy and monetary policy on July 17, economic data have reinforced my view of the outlook and my judgment that the time has come to ease monetary policy and move it to a more neutral stance,” said Waller, echoing Powell’s message that downside risks to the labor market have increased. 

Waller said that monetary policy should look through the tariff effects on inflation and the latest Fed staff estimates extracting the tariff effects shows underlying inflation continues to run close to the FOMC’s 2% target.

"Returning to the labor market, risks are continuing to build," Waller said, estimating September 9 benchmark revisions could show monthly job creation will be reduced by an average of about 60,000 a month. "Other data support the idea that labor demand may be on the edge of a sharp decline." 

"I believe that any decline in labor supply is only masking weakening demand in the labor market. Whether or not supply is down, weakening demand is not good, and it is specifically what monetary policy is intended to address," Waller said. 

He is also concerned about the growth outlook.

“Economic activity has slowed significantly in 2025 from 2024,” said Waller. “Looking ahead, the limited evidence we have is consistent with continued sluggish growth.”