Federal Reserve Governor Christopher Waller on Friday backed a rate cut at the central bank’s upcoming policy meeting in less than two weeks and said he would be willing to cut rates significantly if necessary.
“Given the continued progress on inflation and the labor market slowdown, I believe now is the time to lower the target range for the federal funds rate at our upcoming meeting,” Waller said in remarks prepared for the Council on Foreign Relations. “New York.
Other policymakers have recently argued for easing policy sooner, but this was one of the clearest signs at the September 17-18 Federal Open Market Committee meeting. Waller repeated the rhetoric used by Fed Chairman Jerome Powell in late August – that “the time has come” to adjust monetary policy.
“Determining the pace of rate cuts and ultimately the overall reduction in policy rates is a future decision,” Waller added. He noted that he was “open to the size and pace of cuts” and said “if the data suggests a larger cut is needed, cuts, then I’d support that too.”
His comments came after a weaker-than-expected nonfarm payrolls report on Friday, adding to confidence that the pace of hiring is slowing. The Labor Department reported job growth of 142,000, up from July but still below Dow Jones’ forecast of 161,000.
Waller did not specify how much or how often he thought the Fed should cut interest rates. But he said he was open to the possibility that aggressive measures may be needed to maintain the labor market as inflation tends to moderate towards the central bank’s 2% target.
He pointed out that if the labor market deteriorates faster than expected, the Fed should respond with deeper interest rate cuts, which he said would lead to “a greater likelihood of a soft landing.”
“In addition, I do not expect the first rate cut to be the last. As inflation and employment approach our long-term goals and the labor market slows, a series of rate cuts may be appropriate,” he said.
Futures markets following the jobs report were pricing in a greater likelihood of a quarter-percentage point rate cut this month. But it also points to more aggressive moves later this year, with a half-percentage point move in November and possibly another in December, according to CME Group’s FedWatch Indicator.
