Christopher Waller, a member of the Federal Reserve Board, said that he advocated for a rate cut in December. However, once the Fed starts receiving a large amount of economic data from January, it may decide on rate cuts on a meeting-by-meeting basis.
“As far as our dual mandate is concerned, I’m mainly focused on the labor market. So, I advocate for a rate cut at the next meeting,” Waller said on Fox Business on Monday. “By January, you might see us take a meeting-by-meeting approach to this issue.”
According to futures contracts, investors believe there is about a 70% chance that the Federal Reserve will cut interest rates at its policy meeting to be held on December 9th and 10th. Federal Reserve officials are deeply divided on whether to cut rates again after the cuts in September and October.
Waller said the latest data indicated that the labor market remained weak, but he added that a large number of delayed economic reports would be released after the December meeting, which might make the January decision “a bit tricky”.
The employment statistics for October and November will be released on December 16th, and the consumer price data for November will be released on December 18th.
He said, “If inflation or employment were to rebound suddenly, or if the economy were to take off, that would be a cause for concern. But I still think the labor market won’t improve in the next six to eight weeks.”
Waller is currently being considered by the Trump administration as a candidate to succeed Jerome Powell as the chair of the Federal Reserve next year. He said that about 10 days ago, he had a “very good meeting” with Scott Bentley, who is in charge of the interview process for the position.
Waller said, “I had a great chat with him. We talked about economics, the economic situation and the financial market. They never talk about politics and are very outspoken about economics. For me, it was wonderful to be able to sit down and chat with him.”
In recent weeks, the internal divisions within the Federal Reserve have intensified, with officials voicing their different positions ahead of the central bank’s December policy meeting – while Chair Jerome Powell has remained silent.
On Friday, John Williams, the president of the New York Fed (sometimes seen as a proxy for the Fed chair), expressed support for a rate cut after several other policymakers had leaned against it, ratcheting up the tension.
Since the Fed’s last interest rate decision on October 29, Powell himself has not made any public remarks. But some recent comments suggest that the other voting members of the Federal Open Market Committee are almost evenly split on the next move. This almost certainly means that no matter what the outcome of the December 10 decision is, there will be some dissenting votes.
The recent seesaw battle has disrupted market bets on the next interest rate move, as traders focused on the consensus view of the Federal Reserve are now tallying up the voting tendencies of individual policymakers.
Before the policy meeting in October, investors generally believed that a rate cut in December was a certainty. After the hawkish sentiment rose, the probability of a rate cut dropped significantly, with the federal funds futures price indicating that the probability once fell below 30%. However, after Williams’ speech on Friday, the probability of a rate cut rebounded to over 60%.
