Federal Reserve Governor Christopher Waller signaled strong support for a 25 basis point interest rate cut at the central bank’s upcoming September meeting, reiterating a position he favored in July.
However, his renewed call for a modest cut, despite his own assessment of a deteriorating economy, has prompted one economist to question why he isn’t advocating for a more aggressive 50 basis point reduction.
Waller Supports 25 Bps Cut In September, But Why Not 50?
“Based on what I know today, I would support a 25 basis point cut at the Committee’s meeting on September 16 and 17,” Waller said, adding, “I don’t believe that a cut of larger than 25 basis points is needed in September”.
This stance drew a reaction from Craig Shapiro, a macro strategist at the Bears Trap Report. On the social media platform X, Shapiro questioned the logic of sticking to the same cut size amid worsening conditions.
“If Waller wanted a rate cut in July and he is saying the labor data is even worse now than he thought then, why not push for 50bps cut in September at this point ?” Shapiro asked.
See Also: Fed Skips Rate Cut Again—But Reveals Something We Haven’t Seen Since 1993
No 50 Bps Now, But Waller Sees Cuts Over Next 6 Months
In a speech titled “Let’s Get On with It” delivered at the Economic Club of Miami, Waller argued that recent economic data have only bolstered his case for easing monetary policy.
“I believe this argument is even stronger today, and that the downside risks to the labor market have increased,” he stated. Waller pointed to dismal job creation figures, which he believes may indicate an employment contraction over the last quarter.
Waller’s speech suggests the door remains open for further action, noting he anticipates “additional cuts over the next three to six months,” with the pace being “driven by the incoming data”.
Two Fed Governors Break Ranks In July
For the first time since 1993, two permanent members of the Fed’s Board of Governors—Michelle Bowman and Waller—explicitly dissented, favoring an immediate 25 basis-point rate during the July FOMC meeting.
That kind of internal division hasn’t been seen since Alan Greenspan’s tenure, when Governors Wayne Angell and Lawrence Lindsey opposed the Committee’s easing bias in December of that year.
The dissent highlights growing friction not just between Chair Jerome Powell and Washington, but within his own leadership circle.
Price Action
The CME Group's FedWatch tool’s projections show that markets are pricing an 85.2% likelihood of the Federal Reserve cutting the current interest rates for the Sept. 17 decision.
Additionally, the projections estimate a 92.8% chance of easing in October and a 98.8% chance in December.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Thursday. The SPY was up 0.35% at $648.92, while the QQQ advanced 0.63% to $577.08, according to Benzinga Pro data.
On Friday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading lower.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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