The U.S. Federal Reserve's Governor Christopher Waller argues that the weak job market justifies a rate cut in December, despite ongoing policy disputes at the central bank. He highlights a shift in corporate behavior, noting that firms are increasingly discussing layoffs due to anticipated productivity gains from artificial intelligence and weaker demand. This marks a significant change from the 'no-hire, no-fire' stance just a few weeks prior.
Waller emphasizes the need for the Fed to prioritize job market risks and considers inflation excluding tariffs to be near the target. He predicts further inflation decline, citing economic risks and financial stress among households. The current policy debate is complicated by a lack of official government economic statistics due to a recent 43-day government shutdown, but Waller believes the Fed has sufficient private and public data to make informed decisions.
The Governor has been advocating for rate cuts for several months, but his stance has led to a deep split among Fed colleagues. Some regional reserve bank presidents argue against further cuts due to stable inflation, while Fed Vice Chair Philip Jefferson advocates for a cautious approach. Waller acknowledges the unusual policy divide, emphasizing the importance of maintaining investor confidence in the interest rate trajectory.
Despite the controversy, Waller remains steadfast in his belief that another rate cut is necessary to support the labor market and economic growth, particularly for lower- and middle-income consumers. He highlights the weak job market and the absence of wage pressure as key factors in his argument, urging the Fed to take action to prevent further economic slowdown.
