Federal Reserve Governor Christopher J. Waller
Federal Reserve Board Governor Christopher J. Waller on Sept. 6 expressed his support for cutting interest rates at the Fed’s upcoming meeting, adding that he expects the widely anticipated rate cut to be the first in a series of reductions.
“I believe the time has come to lower the target range for the federal funds rate at our upcoming meeting,” Waller said in a speech at the University of Notre Dame, echoing Fed Chair Jerome Powell’s comments last month.
“Furthermore, I do not expect this first cut to be the last,” Waller added. “With inflation and employment near our longer-run goals and the labor market moderating, it is likely that a series of reductions will be appropriate.”
As of the afternoon of Sept. 6, market participants indicated there’s a 75% chance the Fed will cut rates by 25 basis points at the next meeting, and a 25% chance it will cut rates by 50 basis points, according to the CME FedWatch Tool that tracks trading in the 30-day Fed Funds futures.
Waller’s comments came just a few hours after the Bureau of Labor Statistics released data showing that the U.S. economy created 142,000 jobs in August, well above the downwardly revised figure of 89,000 from July, but below economists’ expectations.
“If subsequent data show a significant deterioration — not softening, but deterioration — in the labor market, the FOMC can act quickly and forcefully to adjust monetary policy,” Waller said. “I am open-minded about the size and pace of cuts, which will be based on what the data tell us about the evolution of the economy, and not on any preconceived notion of how and when the (Federal Open Market) Committee should act.”
Waller noted there are potential risks to cutting rates at a slower pace or at a faster pace, stating that “determining the pace of rate cuts and ultimately the total reduction in the policy rate are decisions that lie in the future.”
He also addressed recent fears of a recession, adding, “While the labor market has clearly cooled, based on the evidence I see, I do not believe the economy is in a recession or necessarily headed for one.”
The FOMC’s next two-day meeting ends Sept. 18.
