Fed Governor Calls for Preemptive Rate Cut Amid Economic Concerns
Federal Reserve Governor Christopher Waller has strongly advocated for another quarter-percentage-point interest rate reduction when the US central bank convenes next month, pointing to concerning signals from the labor market and overall economic slowdown. Waller made these remarks during his prepared address to an economists' gathering in London on Monday, emphasizing that recent data paints a picture of an economy requiring additional monetary support.
Labor Market Shows Signs of Stalling
The available economic indicators, including those gathered during the recent 43-day federal government shutdown, reveal a job market operating near stall speed. Waller specifically highlighted several troubling trends: state unemployment claims have risen slightly, layoff numbers are showing an increase, and there's no evidence of building wage pressures that would typically signal a healthy employment landscape.
"The labor market is still weak and near stall speed," Waller stated unequivocally in his London presentation. His concerns extend beyond employment figures, noting that economic growth has likely slowed while inflation—excluding the probable temporary impact of tariffs—sits "relatively close" to the Fed's 2% target.
Data Gaps and Alternative Information Sources
The extended government shutdown created significant information gaps by delaying the release of core economic data, including the crucial September jobs report scheduled for release on Thursday. However, Waller dismissed suggestions that the Fed is operating "in a fog" that should delay policy decisions.
"We have a wealth of private and some public-sector data that provide an imperfect but perfectly actionable picture of the U.S. economy," he asserted. The Fed governor pointed to information from private payroll processor ADP, state government unemployment claims, and surveys from organizations like the Conference Board and the University of Michigan as sufficient for making informed policy decisions.
Consumer Stress and Policy Implications
Waller expressed particular concern about how current monetary policy is affecting everyday Americans. "I worry that restrictive monetary policy is weighing on the economy, especially about how it is affecting lower- and middle-income consumers," he noted. Evidence of dropping consumer sentiment and financial stress on families dealing with housing and other major costs indicates slower economic growth ahead.
Regarding the upcoming December 9-10 Fed meeting, Waller made his position clear: "I am not worried about inflation accelerating or inflation expectations rising significantly." Instead, his focus remains firmly on labor market conditions, and he doesn't anticipate that the September jobs report or any other data in the coming weeks would alter his view that another rate cut is necessary.
Waller, who is considered a potential candidate to replace Fed Chair Jerome Powell next year, framed the proposed December cut as "additional insurance against an acceleration in the weakening of the labor market" that would help move policy toward a more neutral setting.
