Washington – US Federal Reserve governor Christopher Waller again called for lower interest rates, saying he would support a quarter-percentage point reduction in September and anticipates additional cuts over the next three to six months.
“With underlying inflation close to 2 per cent, market-based measures of longer-term inflation expectations firmly anchored and the chances of an undesirable weakening in the labour market increased, proper risk management means the FOMC (Federal Open Market Committee) should be cutting the policy rate now,” Mr Waller said in remarks prepared for an event on Aug 28.
Mr Waller, whom the Trump administration is considering as a candidate to replace Mr Jerome Powell as Fed chair in 2026, said he does not currently see the need for an outsized rate cut when the central bank’s policy-setting FOMC next meets on Sept 16-17.
But this could change if a monthly report on employment due next week “points to a substantially weakening economy and inflation remains well contained”, he said. “As I stand here today, I anticipate additional cuts over the next three to six months, and the pace of rate cuts will be driven by the incoming data.”
The remarks are the first by a top Fed official in Washington since US President Donald Trump moved this week to fire Dr Lisa Cook, another governor on the central bank’s board. The attempted firing escalated Mr Trump’s pressure campaign for lower rates to an unprecedented level, while opening up a historic legal fight that could have lasting ramifications for the central bank’s independence and the US economy.
Mr Waller did not address the matter about Dr Cook in his prepared remarks. When asked about it after delivering his speech, he said: “When it comes to this, I really don’t have any comment. Things now are in the hands of lawyers in the courts – not a poor, simple policymaker like me.”
In his speech, Mr Waller instead mostly focused on the labour market, where he said “risks are continuing to build”. At the central bank’s last policy meeting in July, he dissented against a decision to hold rates steady, arguing for a rate cut to bolster employment.
The Fed has kept rates unchanged so far in 2025, largely due to concerns that Mr Trump’s tariffs could stoke inflationary pressures. This on-hold stance has provoked Mr Trump’s ire. The President has repeatedly pressed for lower rates, while insulting Mr Powell and fellow policymakers and scrutinising the Fed on several fronts.
But lacklustre employment figures released after the July meeting have prompted greater concern and Mr Powell said last week a cut could be warranted, citing a “shifting balance of risks”.
Mr Waller reiterated his argument that the Fed should “look through” the effect of tariffs on inflation, which he said he expects will prove temporary.
“I am back on ‘Team Transitory’,” he said after the speech, nodding to the debate over inflation during the Covid-19 pandemic. BLOOMBERG