Fed Governor Waller backs interest rate cut at September meeting

US Markets
Friday, September 6th, 2024 3:23 pm EDT

Federal Reserve Governor Christopher Waller has expressed support for an interest rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on September 17-18, signaling a shift towards easing monetary policy. Waller cited progress in moderating inflation and a weakening labor market as key reasons for this potential adjustment, stating that the time has come to lower the federal funds rate. His remarks followed the release of a weaker-than-expected nonfarm payrolls report, which showed job growth of 142,000 in August—higher than July but still below market expectations. This data, along with a slowing pace of hiring, has strengthened the argument for rate cuts.

Waller’s comments represent one of the clearest signals yet that the Federal Reserve is preparing to lower interest rates, aligning with sentiments previously expressed by other policymakers and echoing Fed Chair Jerome Powell’s language from late August. While Waller did not specify how large the rate cut should be or how often cuts should occur, he emphasized the need for flexibility. He suggested that if the labor market weakens more rapidly than anticipated, the Fed may need to adopt a more aggressive approach with larger rate cuts to stabilize the economy and avoid a more severe downturn. Waller underscored that his focus is on achieving a “soft landing” for the economy, balancing the dual goals of controlling inflation and supporting employment.

Additionally, Waller hinted that this initial rate cut may be the beginning of a broader series of reductions, as inflation trends toward the Fed’s 2% target and labor market conditions continue to moderate. He emphasized that future decisions regarding the pace and magnitude of rate cuts will depend on incoming data. Waller remains open-minded about the need for larger cuts if economic indicators suggest a more severe slowdown in the labor market.

Market reaction to Waller’s statements and the jobs report has indicated increased expectations for a quarter-point rate cut in September. Additionally, there is speculation about more substantial cuts later in the year, with the possibility of a half-point reduction in November and another potential cut in December, according to the CME Group’s FedWatch tool. This evolving outlook reflects growing concern over the health of the labor market and the Fed’s willingness to adapt monetary policy to mitigate economic risks while ensuring inflation remains under control.

For the full original article on CNBC, please click here: https://www.cnbc.com/2024/09/06/fed-governor-waller-backs-interest-rate-cut-at-september-meeting.html