(Bloomberg) -- Federal Reserve Governor Christopher Waller said he believes inflation will continue to cool toward the central bank’s 2% target, prompting his support for additional interest-rate cuts this year.
“As always, the extent of further easing will depend on what the data tell us about progress toward 2% inflation, but my bottom-line message is that I believe more cuts will be appropriate,” Waller said Wednesday in prepared remarks for an Organization for Economic Cooperation and Development event in Paris.
Fed officials lowered the central bank’s benchmark policy rate at three consecutive meetings, starting with an outsize half-point reduction in September. Updated projections showed the median policymaker expects two additional cuts in 2025, but views ranged widely — something Waller noted in his remarks.
“If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025,” Waller said. “The pace of those cuts will depend on how much progress we make on inflation, while keeping the labor market from weakening.”
Waller pointed to a number of reasons for his confidence inflation will continue to move toward the 2% goal. Those include the six-month underlying inflation trend, better-than-expected November price data and the role played by prices that are estimated rather than directly observed in the calculation of a key measure of inflation.
Waller said imputed prices — which have driven above-target inflation in the past year — are “a less reliable guide to the balance of supply and demand across all goods and services in the economy.”
Fed Chair Jerome Powell and several other policymakers have signaled there need not be a rush to implement additional interest-rate cuts. Such caution has largely stemmed from lingering concerns about inflation and an overall solid labor market.
Investors see virtually no chance of a cut at policymakers’ upcoming Jan. 28-29 meeting, according to futures markets.
Waller flagged that minimal further progress on inflation recently “has led to calls to slow or stop reducing the policy rate.”
“However, I believe that inflation will continue to make progress toward our 2% goal over the medium term and that further reductions will be appropriate,” he said.
In a question-and-answer session following his remarks, Waller also said he believes Fed policy is still having a restraining effect on economic activity.
“When you look at the US labor market, it is not behaving or acting like an economy that is overheating or not restricted,” he said. “Policy rates are having an effect on that.”
Tariff Impact
Waller also addressed the potential of tariffs — a tool President-elect Donald Trump has vowed to use aggressively — to put upward pressure on prices.
“If, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view of appropriate monetary policy,” he said.
Waller said the overall US economy is “on a solid footing,” adding the jobs landscape is near the Fed’s objective of maximum employment.
Fresh figures due Friday are expected to show the US economy added 163,000 jobs and the unemployment rate held steady at 4.2% in December, according to a Bloomberg survey of economists.
“I have seen nothing in the data or forecasts that suggests the labor market will dramatically weaken over coming months,” he said.
(Adds additional comments from Waller from question-and-answer session.)
©2025 Bloomberg L.P.