Federal Reserve Governor Christopher Waller, one of two policymakers who voted for a rate cut in January, now believes another reduction in March may not be needed. Speaking at the National Association for Business Economics Economic Policy Conference, Waller said the latest economic data—particularly stronger hiring and falling inflation—had left him "a little more optimistic" about the outlook.
Waller's shift in tone is notable. Appointed to the Fed in 2018 by President Donald Trump, who has urged the central bank to bring rates down to 1%, Waller's support for easing has previously aligned with that perspective. The apparent move toward patience suggests greater confidence that inflation is cooling without the need for additional stimulus.
According to the CME Group's FedWatch tool, which gauges market expectations based on fed funds futures, investors now see a 95.5% probability that the Federal Open Market Committee will hold rates steady at its mid-March meeting. Those forecasts, however, can shift quickly with new data.
In his speech, Waller recalled that last fall's rate cuts came because "job gains had slowed and downside risks to employment had increased, amid somewhat elevated inflation." He said that stripping out the effects of tariffs showed core inflation close to the Fed's 2% goal, even as a weakening labor market signaled risk.
But January's numbers told a different story. The economy added 130,000 jobs, and consumer prices rose 2.4% year-over-year.
"According to newly updated payroll numbers for the past year," Waller said, "the initial estimate is that the U.S. economy created more jobs in January than in the previous nine months combined." That, he added, was a welcome change after "an extraordinarily weak" 2025 for job creation—the worst non-recession year since 2002.
Still, Waller cautioned that the data was "positive, but not conclusive." Further evidence is coming: February's employment and CPI reports, along with January's personal consumption expenditures (PCE) inflation data, are all due before the March meeting.
Waller noted that consumer spending remains largely driven by the highest-earning 20% of households, buoyed by stock market gains and that many of last year's job gains were later revised downward.
With mixed signals still in play, Waller said the path ahead could go either way. If new labor numbers point to renewed weakness, another rate cut could still make sense. "It's close to a coin flip right now," he said
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