Christopher Waller, Governor of the U.S. Federal Reserve, during the Fed Listens event in Washington, D.C., U.S., Friday, March 22, 2024. Three central bank decisions this week sent a clear message to markets that officials are preparing to ease monetary policy, reigniting investors' appetite for risk.
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U.S. Federal Reserve Governor Christopher Waller on Friday declared his support for cutting interest rates at the central bank's next policy meeting in less than two weeks, and indicated he would be open to a large cut if needed.
“Given the progress we have made and continue to make in addressing inflation and the moderation in the labor market, I believe it is time to lower the target range for the federal funds rate at our next meeting,” Waller said in remarks prepared for the Council on Foreign Relations in New York.
Other policymakers have recently called for monetary policy to ease soon, but this is one of the clearest signs that it will happen at the Federal Open Market Committee’s September 17-18 meeting. Waller echoed words used by Fed Chairman Jerome Powell in late August — that “the time has come” for monetary policy adjustments.
“The pace of rate cuts and ultimately the overall rate cut are decisions for the future,” Waller added, noting that he was “open-minded about the size and pace of cuts,” and said: “If the data suggests that larger cuts are needed, I would support that as well.”
His comments came on the heels of a weaker-than-expected nonfarm payrolls report on Friday, which added to the sense that the pace of hiring is weakening. The Labor Department reported that jobs grew by 142,000, higher than in July but still below the Dow Jones forecast of 161,000.
Waller did not specify how much he thought the Fed should cut or how fast it would go. But he said he was open to the possibility that the Fed would need to take aggressive action to keep the labor market stable as inflation slows toward the central bank’s 2% target.
He noted that if the labor market deteriorates more quickly than expected, the Fed would have to respond with larger cuts, which he said would lead to a “greater likelihood of a soft landing.”
“Furthermore, I do not expect this first cut to be the last. With inflation and employment moving closer to our long-run goals and the labor market slowing, a series of cuts will likely be appropriate,” he added.
Futures prices in the wake of the report have been tilted toward a higher probability of a quarter-point rate cut this month. But they also pointed to more aggressive moves later in the year, with a half-point move in November and possibly another in December, according to the CME Group’s FedWatch gauge.
