Fed Governor Waller sees more rate cuts but says central bank needs to be ‘cautious about it’

Federal Reserve Governor Christopher Waller recently expressed his support for lowering interest rates, but emphasized the need for caution amidst conflicting economic signals. In an interview on CNBC’s “Squawk Box,” Waller stated that while he believes rate cuts are necessary, the Fed must proceed carefully.

Waller highlighted the dichotomy between a weakening U.S. labor market and robust GDP growth. He noted that while job losses indicate a potential economic slowdown, strong GDP growth and concerns about inflation, which is currently above the Fed’s target of 2%, present a conundrum. Waller emphasized the need for a balanced approach, stating, “I want to move towards cutting rates, but you’re not going to do it aggressively and fast, in case you make a big mistake on which way things go.”

During the September meeting, the Federal Open Market Committee approved a quarter percentage point reduction, with indications of two more cuts by the year’s end. Waller supported this gradual pace, cautioning against more aggressive cuts. In contrast, his colleague Governor Stephen Miran advocated for a larger half-point reduction and a total reduction of 1.25 percentage points by year-end.

Regarding the speculation that Waller is a finalist to replace Fed Chair Jerome Powell, he emphasized that his recent interview with Treasury Secretary Scott Bessent focused on economic policy rather than politics. Waller’s discussions with Bessent centered on his viewpoints and speeches, with a focus on serious economic discourse.

Waller’s cautious approach extends to his economic outlook as well. He noted potential job losses in recent months and expressed belief that the impact of tariffs imposed by President Trump will be temporary. Overall, Waller’s measured stance on monetary policy and the economy reflects a balanced and thoughtful approach to navigating the current economic landscape.