Federal Reserve Governor Christopher Waller on Friday backed an interest rate cut at the central bank’s next policy meeting in less than two weeks and signaled he would be open to a substantial reduction if needed.
“Given the progress we have made and the continued moderation in the labor market, I believe the time has come to lower the target range for the federal funds rate at our next meeting,” Waller said in remarks prepared for the Council on Foreign Relations in New York.
Other policymakers have recently called for rapid monetary easing, but this is one of the clearest indications that it will happen at the September 17-18 Federal Open Market Committee meeting. Waller reiterated that the Fed chair Jerome Powell used in late August — that the “time has come” to adjust monetary policy.
“The determination of the pace of rate cuts and ultimately the total rate cut are decisions that will be made in the future,” Waller added. He said he was “open-minded about the size and pace of the cuts” and said: “If the data suggests that deeper cuts are needed, then I will support that as well.”
His comments follow a weaker-than-expected statement Nonfarm payrolls report Friday That reinforces the belief that the pace of hiring is slowing. The Labor Department reported job growth of 142,000, up from July but still below the 161,000 forecast by the Dow.
Waller did not say how much or how often he thinks the Fed should cut rates. But he said he is open to the possibility that it will have to be aggressive to keep the labor market afloat as inflation nears the central bank’s 2% target.
He noted that if the labor market deteriorates faster than expected, the Fed should respond with deeper cuts, which he said would lead to “a greater likelihood of achieving a soft landing.”
“Furthermore, I do not expect this first reduction to be the last. With inflation and employment close to our long-term targets and the labor market moderating, it is likely that a series of reductions will be appropriate,” he said.
Futures prices following the jobs report are leaning toward a greater likelihood of a quarter-percentage-point rate cut this month. But they also point to more aggressive action later in the year, with a half-point cut in November and perhaps another in December, according to the CME Group’s FedWatch index.
