Fed’s Waller backs September rate cut, signals more easing ahead

Waller signals September cut, cites labor market weakness

Federal Reserve Governor Christopher Waller said he favors a quarter-point rate cut at the Fed’s next policy meeting in September, pointing to growing risks in the labor market. Speaking at the Economic Club of Miami, Waller emphasized that with inflation close to the Fed’s 2% goal, the central bank must shift toward risk management to prevent deeper economic weakness.

“With underlying inflation close to 2% and labor market risks building, proper risk management means the FOMC should be cutting the policy rate now,” Waller said.

He added that while a larger cut isn’t warranted at present, that could change if the upcoming August employment report shows further deterioration.

Path of easing: More cuts in coming months

Waller noted he anticipates additional cuts over the next three to six months, with the pace determined by incoming data. His stance marks a continuation of his dissent at the Fed’s July meeting, where he argued for a cut while most policymakers favored holding rates steady.

The Fed has so far left rates unchanged in 2025, wary of inflationary spillovers from President Trump’s tariffs. But softer employment figures since July have prompted officials — including Chair Jerome Powell — to hint that easing may soon be appropriate.

Political pressure at the Fed iIntensifies

Waller’s remarks come against the backdrop of unprecedented political tension. President Donald Trump earlier this week moved to fire Fed Governor Lisa Cook over mortgage fraud allegations, escalating a legal and political battle over the central bank’s independence.

Asked about the controversy, Waller declined comment, saying it was “in the hands of lawyers in the courts — not a poor, simple policymaker like me.”

The attempted dismissal underscores Trump’s mounting pressure campaign on the Fed, as the White House pushes aggressively for lower rates ahead of the 2026 election cycle.

Waller revives “Team Transitory” view on inflation

Despite tariffs pushing some prices higher, Waller argued the Fed should “look through” temporary inflation effects, noting that wage and services inflation trends appear consistent with stabilization.

“I am back on Team Transitory,” Waller said after the event, reviving the phrase that defined the Fed’s debate over pandemic-era inflation.

He stressed that underlying inflation expectations remain well anchored, allowing the Fed to pivot toward protecting growth and employment without undermining price stability.

Data to drive pace of cuts

Markets are now fully pricing in a September rate cut, with futures implying at least one more by year-end. Analysts say the August jobs report will be critical in shaping the Fed’s path: a weak print could push policymakers toward a more aggressive easing cycle, while stronger labor data may slow the pace.