U.S interest-rate futures rise after Fed Gov. Waller remarks, now pricing a half-point Fed rate cut in Sept.
The time has come to start cutting interest rates, but carefully, Federal Reserve Governor Christopher Waller said Friday. The time for forceful cuts may come, but only if the data demand such moves, he added.
In a speech at the University of Notre Dame, where he was a teacher, Waller said the August jobs data, published Friday, fit with an economy that is growing at a modest pace.
"Today's job report continues the longer-term pattern of a softening of the labor market that is consistent with moderate growth in economic activity," he said.
"While the labor market has clearly cooled, based on the evidence I see, I do not believe the economy is in recession or necessarily headed for one soon," Waller added.
The time may come for the Fed to act forcefully and quickly to cut interest rates, but it will be based on the data "and not on any pre-conceived notion of how and when the FOMC should act," Waller said.
He stressed that the Fed should not over-react "to any data point, including the latest data."
Determining the pace of rate cuts and the ultimate end-point of the monetary easing cycle were "decisions that lie in the future," Waller said.
"As of today, I believe it is important to start the rate cutting process at our next meeting," he said.
"While I expect that these cuts will be done carefully as the economy and employment continue to grow, in the context of stable inflation, I stand ready to act promptly to support the economy as needed," he said.
"If subsequent data show a significant deterioration in the labor market, the FOMC can act quickly and forcefully to adjust monetary policy," Waller said.
He said he was open-minded about the size and pace of cuts, "which will be based on what the data tell us about the evolution of the economy."
"If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings," Waller said.
"If the data suggests the need for larger cuts, then I will support that as well, he added.
The Fed Governor said that he was a "big fan" of the Fed's four consecutive 75 basis point rate hikes in 2022, and he will advocate for big moves on the way down, if appropriate.
The Fed has kept its benchmark interest rate in a range of 5.25%-5.5% for the past year.
Fed Chair Jerome Powell said last month that the time has come for the Fed to ease monetary policy.
Markets fully expect a Fed rate cut in September and have been debating whether officials would cut by 25 basis point or a larger 50 basis point move.
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