Waller: December cut appropriate, but January action more uncertain

The job market is weak enough to warrant another quarter-point rate cut in December, though action beyond that depends on an upcoming flood of data delayed by the government shutdown, Fed Governor Christopher Waller said on Monday.

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Since the last Fed meeting, “most of the private sector and anecdotal data that we've gotten is that nothing has really changed. The labor market is soft. It’s continuing to weaken,” with inflation expected to ease, Mr, Waller said on Fox Business’ Mornings with Maria.

While that makes a December cut appropriate, “January could be a little trickier, because we're going to get a flood of data that’s released. If it is kind of consistent with what we’ve seen, then you can make the case for January. But if it suddenly shows a rebound in inflation or jobs or the economy’s taking off, then it might give concern” about more cuts, Mr. Waller said.

Fed officials are divided over whether to cut rates again at the December meeting, though recent comments from top policymakers — including New York Fed President John Williams on Friday — have shifted market expectations strongly in favor of another quarter-point reduction at their Dec. 9-10 meeting. According to CME Group’s FedWatch tool, the futures-market-implied probability of a quarter point reduction to a range of 3.5% to 3.75% is now about 83%, roughly double what it had been a week ago.