This past week, the US Federal Reserve decided to hold rates steady as was widely anticipated by markets. The vote saw two dissenters, Christopher Waller and Stephen Miran, who both preferred a 25 bps reduction.
Today, Waller issued a statement explaining why cutting rates made more sense, noting that holding rates remains restrictive and that economic data indicate a need for further easing.
Waller first focused on employment, noting that the unemployment rate has risen in recent months and that last year’s data will likely be revised downward, suggesting no growth in employment in 2025.
“Let this sink in for a moment—zero job growth versus an average of almost 2 million for the 10 years prior to 2025,” said Waller.
Addressing the other part of the Fed mandate – inflation, Waller said that inflation is due to tariff effects, and excluding this variable, inflation is just a bit higher than their 2% target.
Waller issued his statement on the day President Donald Trump announced his selection of Kevin Warsh as the new Fed Chair, who has vocally called for lower rates.
Warsh joining the Fed does not necessarily guarantee a quick move to lower rates, as ten FOMC members voted to hold rates steady. Still, some data points suggest inflation is lower than the government reports, and if revisions indicate a weaker economy, rates could fall before Warsh takes over.
