MNI: Fed’s Waller Says Time To Cut Rates, Pace Uncertain

The time has come for the Federal Reserve to begin cutting interest rates, and the pace of reductions will be determined by the amount of deterioration in the economy and employment, Fed Governor Chris Waller said Thursday.

“I believe the time has come to lower the target range for the federal funds rate at our upcoming meeting,” Waller said in prepared remarks.

“I believe there is sufficient room to cut the policy rate and still remain somewhat restrictive to ensure inflation continues on the path to our 2%. Determining the appropriate pace at which to reduce policy restrictiveness will be challenging.”

Waller said he believes the job market is coming into better balance but not necessarily falling out of bed.

“Today’s jobs 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 a recession or necessarily headed for one soon."

PACE OF CUTS

The FOMC has yet to decide on the pace of future rate cutting, Waller said. (See: MNI POLICY: Fed Prefers Gradual Rates Easing If Jobs Allow)

“Determining the pace of rate cuts and ultimately the total reduction in the policy rate are decisions that lie in the future. As of today, I believe it is important to start the rate cutting process at our next meeting,” Waller said.

“If subsequent data show a significant deterioration in the labor market, the FOMC can act quickly and forcefully to adjust monetary policy. I am 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, and not on any preconceived notion of how and when the Committee should act.”

He added that “if the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings. If the data suggests the need for larger cuts, then I will support that as well.”