Fed Governor Waller helps price reduce at September assembly, however is open to larger steps
Federal Reserve Governor Christopher Waller on Friday called for a cut in the key interest rate at the upcoming central bank meeting in less than two weeks and indicated that he would be prepared to make a significant cut if necessary.
“Given the progress made and continued progress on inflation and the softening in the labor market, I believe it is time to lower the target range for the federal funds rate at our upcoming meeting,” Waller said in a speech prepared for the Council on Foreign Relations in New York.
Other politicians have recently argued for an early easing of monetary policy, but this is one of the clearest indications that this will happen at the Federal Open Market Committee meeting on September 17 and 18. Waller repeated the language used by Fed Chairman Jerome Powell in late August – namely, that the “time has come” to adjust monetary policy.
“The pace of rate cuts and ultimately the overall cut in the policy rate are decisions that lie in the future,” Waller added. He noted that he was “unbiased on the size and pace of the cuts” and said: “If the data suggest the need for larger cuts, I will support that as well.”
His comments followed a weaker-than-expected nonfarm payrolls report on Friday that reinforced views that the pace of hiring is slowing. The Labor Department reported a job gain of 142,000, more than in July but still less than the Dow Jones forecast of 161,000.
Waller did not specify how much or how frequently he thinks the Fed should cut rates, but he said he is open to the possibility that the Fed will need to act aggressively to keep the labor market afloat as inflation approaches the central bank's 2 percent target.
He pointed out that if the labor market deteriorates faster than expected, the Fed should respond with more extensive cuts, which he said would “increase the likelihood of a soft landing.”
“Moreover, I do not expect this first cut to be the last. With inflation and employment close to our longer-term objectives and a weakening labour market, it is likely that a series of cuts will be appropriate,” he said.
Futures market prices following the release of the jobs report suggested a rate cut this month was more likely, but they also pointed to more aggressive moves later in the year, including a half-percentage-point hike in November and possibly another in December, according to the CME Group's FedWatch index.
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