(Reuters) – Federal Reserve Governor Christopher Waller said on Friday that “the time has come” for the U.S. central bank to begin a series of interest rate cuts this month, adding that he was open-minded about the size and pace of those cuts.
“If the data supports back-to-back cuts, then I think back-to-back cuts are appropriate,” Waller said in a speech prepared for the University of Notre Dame. “If the data suggests the need for bigger cuts, then I will support that as well. I was a big supporter of front-loading rate hikes when inflation was rising in 2022, and I will support front-loading rate cuts when appropriate.”
The US central bank is widely expected to cut its policy rate, currently at 5.25%-5.50%, at its September 17-18 meeting. This is largely due to Fed Chairman Jerome Powell’s statement two weeks ago that “the time has come” to ease policy given the progress on inflation and the cooling labor market.
Waller used the same phrase, but his comments were stronger, indicating that he is open to starting the rate cuts with a sharp half-percentage-point cut in borrowing costs.
Data released earlier Friday showed that average monthly job growth over three months is now 116,000, below what many economists estimate is needed to meet the job growth needs of a growing population. That, along with other recent data, “reinforces the idea that there is continued moderation in the labor market,” Waller said.
While the data point to a slowdown but not a deterioration, and it does not appear the economy is headed for a recession, he said, “The current set of data no longer calls for patience, but for action,” as the focus of Fed policy shifts from an inflation-targeting approach to maintaining full employment.
Waller also noted that progress has been made in reducing inflation.
Wage growth has slowed in a manner that is “consistent” with the Fed’s 2% inflation target, he said.
Waller said inflation is now on track to meet the Fed’s goal. Underlying inflation, as measured by the change in the core price index for personal consumption expenditures, is 2.6% annualized over six months and 1.7% annualized over three months.
While the rate cuts implemented at the Fed’s upcoming meeting “will be implemented carefully as the economy and employment continue to grow, in the context of stable inflation, I stand ready to take swift action to support the economy if needed,” Waller said.
(Reporting by Ann Saphir; Editing by Paul Simao)
