Fed Governor Waller says fed should start cutting rates

Federal Reserve Governor Christopher Waller has said the central bank should cut rates at its next meeting in two weeks, and that it could follow with more cuts over the coming months.

In an interview with CNBC, Waller said the labor market “has come in much softer,” referring to downward revisions for jobs data at the start of last month. “Usually when the labor market turns bad, it turns bad fast… So for me, I think we need to start cutting rates at the next meeting.”

“We don’t have to go into a lock sequence of steps. We can kind of see where things are going, because people are still worried about tariff inflation. I’m not, but everybody else is.”

Waller is thought to be on President Donald Trump’s list of possible successors to the Fed’s current chair, Jerome Powell, next year. He was one of two Fed governors to to vote against July’s decision to hold rates in a range of 4.25%-4.5%.

He said interest rates are about one to 1.5 percentage points above their “neutral” level, and that there could be more cuts in the subsequent months.

“I would say over the next three or six months, we could see multiple cuts coming in. Whether it’s every other meeting, every meeting, we’ll have to wait and see what the data says,” he said.

He added that tariff related inflation would be “not permanent”.

“If tariff inflation looks like it’s going to be temporary — and it’s a one-time level effect, which I think — inflation expectations are anchored and the labor market’s really weakening. So our dual mandate says worry about employment and inflation — look through the inflation, worry about employment, start cutting.”

It comes ahead of a fresh update on Friday on the labor market, with investors increasingly betting the Federal Reserve will move to ease policy as signs of a cooling labor market mount.

And separate data showing job openings at a 10-month low on Wednesday reinforced the view that hiring momentum is fading. Traders are now factoring in multiple rate cuts in 2025, with expectations building for the first step this month. The Fed’s next policy decision is on Sept. 17.

When asked about Trump’s attempts to fire fellow Fed Governor Lisa Cook, Waller declined to comment.

But he said the central bank’s independence is “critical for everything we do, and there are things that are going on that make people worried. But I still believe that we have an independent Fed. People that are appointed will behave that way and act in an apolitical fashion.”

Cook sued Trump in August over his attempt to oust her, setting up an enormous legal battle around the central bank’s independence.

The White House has said it exercised “lawful authority” in removing Cook, claiming there was “cause to remove a governor who was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions.”