Ben Waller, a leading candidate to become the next Federal Reserve chair and a current Fed governor, said on Monday that he supports another interest rate cut at the December policy meeting. He stated that he is increasingly concerned about the sharp slowdown in the labor market and hiring activity .
He stated that "the labor market remains weak and is nearing the critical level of a slowdown in growth," while inflation, excluding the effects of tariffs, is "relatively close" to the Federal Reserve's 2% target.
“I’m not worried about accelerating inflation or a significant rise in inflation expectations,” Waller said in a speech. “My focus is on the labor market, and after several months of weakness, the September jobs report later this week or any other data in the coming weeks is unlikely to change my view that another rate cut is necessary.”
Waller made it clear that he supports another 25 basis point rate cut .
Although Waller has publicly supported interest rate cuts on several occasions in recent months, his comments on Monday reflected recent developments. Due to the previous U.S. government shutdown, which halted the release of official economic data, the policymaker cited several other indicators showing weak labor market demand and consumer pressure.
He also pointed out that price data indicates tariffs will not have a long-term impact on inflation. Another interest rate cut would be a "risk management" measure.
“I am concerned that restrictive monetary policy is putting pressure on the economy, especially affecting low- and middle-income consumers,” Waller said. “The December rate cut will provide additional protection against a faster-than-expected weakening of the labor market and push policy toward a more neutral level.”
Following consecutive 25-basis-point rate cuts at its September and October meetings, the Federal Open Market Committee (FOMC), the Federal Reserve's monetary policy-making body, will hold its next meeting on December 9-10.
The Fed's "civil war" intensifies
Currently, the Federal Reserve is increasingly divided on whether to cut interest rates in December, and Waller's remarks have put him firmly in the camp that supports further monetary easing to prevent the employment situation from deteriorating further .
On the other hand, several regional Federal Reserve presidents have recently publicly opposed further interest rate cuts, arguing that inflation remains a persistent economic threat and that further easing of monetary policy could lead to a resurgence of inflation.
Federal Reserve Vice Chairman Jefferson said on Monday that he believes downside risks to employment have increased, but the Fed should be cautious about further rate cuts as interest rates are nearing neutral levels.
Boston Federal Reserve President Collins said last week that she believes the threshold for further policy easing is high.
Like Waller, Federal Reserve Governor Milan, appointed by US President Trump, also explicitly supports a December rate cut. His core argument is a 50-basis-point cut, while also indicating that a minimum cut of 25 basis points is necessary. Milan has consistently maintained a relatively aggressive stance on rate cuts. In the previous two Federal Reserve policy meetings, he voted against a mere 25-basis-point cut, insisting on a 50-basis-point cut each time.
According to CME's "FedWatch," the probability of the Federal Reserve cutting interest rates by 25 basis points in December is currently 42.9%, while the probability of keeping interest rates unchanged is 57.1%.
It is foreseeable that, regardless of the Fed's decision in December, Powell may face more opposition than at last month's meeting, when Kansas City Fed President Schmid stated that rising inflation was not suitable for further rate cuts, while Fed Governor Milan called for a significant 50-basis-point rate cut, saying that inflation was falling faster than generally perceived.
Nick Timiraos, a well-known financial journalist known as the "new Fed mouthpiece," recently wrote that Fed officials' latest speeches revealed serious policy differences, which have become increasingly difficult to bridge due to the lack of key economic data caused by the government shutdown. This makes the FOMC meeting scheduled for December 9-10 particularly sensitive and closely watched.
He believes that regardless of whether the Federal Reserve cuts interest rates in December, it will face at least three dissenting votes . If rates remain unchanged, it will be opposed by three governors appointed by Trump; if rates are cut by 25 basis points, another group of at least three officials may oppose it. Four regional Fed presidents with voting rights this year, as well as Fed Governor Barr, have previously expressed greater concern about inflation risks. This means the December meeting will be one of the most contentious policy discussions in recent years.
(Article source: CLS)
