Fed Governor Waller backs December rate cut as support for weakening labor market

Federal Reserve Governor Christopher Waller on Monday voiced support for another rate cut at the central bank’s December meeting, saying he was growing concerned about the sharp slowdown in the labor market and hiring.

At an increasingly divided Fed, Waller’s comments place him in the camp of those who want to ease monetary policy to prevent further peril to the employment picture. Others, including several regional presidents, have expressed opposition in recent days against further cuts, viewing inflation as a persistent economic threat that could be reignited by additional easing.

“I’m not worried about inflation accelerating or inflation expectations rising significantly,” Waller said in a prepared speech to a group of economists in London. he said. “My focus is on the labor market, and after months of weakness, the September jobs report due later this week or any data over the next few weeks is unlikely to change my view that another cut is necessary.”

The Federal Open Market Committee, which determines the rate, will hold its next meeting on December 9-10. Markets are divided over which way the panel will move after consecutive quarter-point or 25 basis point cuts at meetings in September and October.

Earlier Monday, Vice President Philip Jefferson struck a neutral tone regarding the upcoming meeting, saying only that the current economic environment calls for policymakers to “proceed slowly” as they consider further cuts. Boston Fed President Susan Collins said Wednesday she sees a “high bar” for further easing.

Waller indicated he favored another quarter-point move. Gov. Stephen Miran, who considers Waller an appointee of President Donald Trump, had supported the half-point moves in two previous meetings.

Although Waller has repeatedly spoken out in favor of cuts in recent months, she updated her comments to reflect recent developments. The policymaker cited a lack of government data during the recently ended shutdown, weak demand in the labor market and a variety of other data points that show pressure on consumers.

He also said price data showed the tariffs would not have a long-lasting impact on inflation. Cutting interest rates again would be an exercise in “risk management,” a term that Chairman Jerome Powell has also used.

“I worry that restrictive monetary policy is putting pressure on the economy, particularly how it affects low- and middle-income consumers,” Waller said. “A cut in December would provide additional insurance against accelerating labor market weakening and move policy towards a more neutral environment.”

Waller dismissed suggestions that the Fed was “flying blind” on policy because the shutdown suspended nearly all official government economic data.

“Despite the government shutdown, we have a wealth of private sector and some public sector data that provide an imperfect but perfectly workable picture of the U.S. economy,” he said.