Fed’s Waller Highlights Soft Labor Market Supporting Rate Cuts

Fed’s Chris Waller supports rate cuts due to soft labor market, with inflation under control. He’s a key contender for Fed Chair.

Fed Governor Chris Waller has indicated his support for further rate cuts, focusing on the soft state of the U.S. labor market. Waller stated that job growth remains weak, with payroll increases falling below expectations. 

His comments suggest that the Federal Reserve should prioritize improving labor market conditions through rate reductions. Waller believes the current weak job market justifies such a policy approach, especially given the broader economic challenges.

Waller Highlights Weak Job Growth and Rising Unemployment

At the Yale CEO Summit, Waller spoke about the U.S. labor market’s ongoing struggles. He described the job market as “very soft,” citing a significant slowdown in job creation. 

According to recent reports, the unemployment rate reached 4.6% in November, the highest level since 2021. Waller noted that job growth has nearly stagnated, with payroll increases showing little improvement.

This commentary came shortly after the release of the U.S. jobs data, which reflected rising unemployment. These figures have raised concerns about economic recovery, leading Waller to suggest that the Federal Reserve should act. 

He believes that rate cuts would provide much-needed relief to the labor market, helping to stimulate job growth and reduce the unemployment rate.

Inflation Remains Controlled, Allowing Room for Rate Cuts

Despite the concerns over the labor market, Waller reassured that inflation is under control. He emphasized that inflation remains well-anchored around the Fed’s 2% target. 

With inflation not showing signs of reaccelerating, Waller sees no immediate need for drastic monetary tightening. This allows the Fed the flexibility to focus on improving labor market conditions without worrying about runaway inflation.

Waller’s statements suggest that the current inflation rate is manageable. 

This creates an opportunity for the Federal Reserve to prioritize rate cuts to stimulate job growth and support the economy. By gradually reducing interest rates, Waller believes the Fed can avoid worsening inflation while boosting employment prospects.

Related Reading: Hassett Says Trump Has No Role in Federal Reserve Rate Calls

Waller’s Position on Fed Chair Race and Potential Leadership Role

A new contender is emerging to replace Jerome Powell as chairman of the Federal Reserve. President Donald Trump is set to interview Fed Governor Christopher Waller today, according to a Wall Street Journal report. 

Waller joins a short list of candidates that includes former Fed Governor Kevin Warsh and National Economic Council Director Kevin Hassett.

Waller, however, has emphasized the importance of Fed independence and has expressed a more measured approach to rate cuts. While Trump has pushed for aggressive actions to lower rates, Waller believes in a more gradual approach. 

His potential appointment as Fed Chair would likely shape future monetary policy decisions, especially if he prioritizes reducing rates to support job growth.

The possibility of Waller replacing Powell as Fed Chair has led to significant discussion about the direction of U.S. monetary policy. His views on rate cuts, inflation, and the labor market will likely influence his approach if nominated for the role. 

The outcome of this race will be crucial in shaping the Federal Reserve’s response to the economic challenges ahead.