Federal Reserve Governor Christopher Waller’s recent statements have drawn considerable attention, particularly regarding his call for an interest rate cut at the next Federal Open Market Committee (FOMC) meeting. His perspective offers a counter-narrative to mainstream economic views, highlighting a potential shift in how monetary policy may be approached in the future.
In a Fox Business interview, Waller asserted, “I’m advocating for a rate cut at the next meeting. Inflation isn’t a big problem going forward. It’s going to start pulling back.” This stance reflects growing tension within the Fed as members grapple with whether inflation or a weakening labor market poses a more significant threat to the U.S. economy. Waller’s position aligns with recent labor data indicating a contraction in the job market, which he sees as a pressing concern.
Data from staffing firm Challenger, Gray & Christmas reported roughly 1 million job cuts announced in 2025, alongside a troubling trend highlighted by private payroll firm ADP. The firm found that job creation dropped to less than 7,000 positions per month in both September and October. Such numbers mirror patterns seen in previous economic downturns, further bolstering Waller’s call for a change in policy.
Consumer sentiment surveys serve as another significant indicator of economic health. The University of Michigan’s consumer sentiment index is near record lows, usually a warning sign before a recession. Additionally, small business owners are reporting lower expectations for hiring and profitability, as evidenced by recent surveys from the National Federation of Independent Business (NFIB), and job postings on platforms like Indeed have seen declines.
Waller’s analysis draws on various “soft” and “hard” data, emphasizing the labor market’s diminishing strength. He commented, “The labor market is still weak and near stall speed.” This view suggests that current interest rates could hinder job growth further. He argues that the Fed has sufficient data to make informed decisions despite recent delays in critical statistics caused by a prolonged government shutdown.
While some members of the FOMC express concerns about a potential resurgence of inflation, Waller counters that recent data indicates price pressures are easing. He noted, “I am not worried about inflation accelerating or inflation expectations rising significantly.” His observations point to stabilized inflation expectations, even as high borrowing costs continue to burden consumers.
Waller’s concerns extend to the impact of restrictive monetary policy on families, particularly lower- and middle-income households. He expressed, “I worry that restrictive monetary policy is weighing on the economy, especially about how it is affecting lower- and middle-income consumers.” This sentiment highlights a critical issue; as real wages stagnate and the costs of living remain high, families are increasingly at risk under current monetary policy.
Market reactions signal that Waller’s arguments resonate. Futures markets suggest a nearly 78% probability of a rate cut in December, yet internal consensus at the Fed is far from established. FOMC Chair Jerome Powell’s insistence on being “data-dependent,” alongside cautious sentiments from Vice Chair Philip Jefferson and several regional Fed presidents, illustrates the division within the committee.
The upcoming FOMC meeting carries additional significance as it will be the first since Fed Governor Stephen Miran’s dissent for a more substantial rate cut, contrasting with Governor Jeffrey Schmid’s preference to keep rates unchanged. This divergence underscores the “vigorous debate” Waller mentioned, reflecting the Fed’s struggles to balance its dual mandate of maximizing employment and ensuring stable prices amidst mixed economic signals.
Real GDP growth has slowed, and the job market appears increasingly vulnerable. Waller articulated that stock market gains may be misleading, tied largely to AI-driven businesses that do not represent a significant share of employment. He noted, “The rise in the stock market is substantially driven by artificial intelligence (AI)-related businesses.” This insight raises questions about the sustainability of such gains in an economy experiencing substantial job cuts linked to anticipated productivity gains from technology.
Looking ahead, Waller hinted that the Fed might adopt a “meeting-by-meeting approach” beginning in January, indicating a shift away from long-term guidance in favor of flexible responses to economic conditions. He remarked, “You may see more of a meeting-by-meeting approach once you get to January,” suggesting that adaptive monetary policy could become necessary as uncertainty clouds the economic outlook.
Political implications loom as well. Waller’s recent discussions with Treasury Secretary Scott Bessent have sparked rumors of a possible nomination for Federal Reserve Chair should there be a change in administration. Waller himself said, “He and I seem to hit it off very well, talking about economics, the economy, financial markets.” Such developments add another layer of complexity to the Fed’s dialogue and its future direction.
As Waller propels the discussion towards a December rate cut, the stakes are high. With rising layoffs, cooling inflation, and the economic strain felt by families, this FOMC meeting could set the tone for how monetary policy will evolve in 2024 and beyond. Waller summarized his view bluntly: “A December cut will provide additional insurance against an acceleration in the weakening of the labor market.” How the FOMC ultimately decides on this pivotal issue remains to be seen.
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