US Federal Reserve governor open to larger interest rate cuts

ISTANBUL 

US Federal Reserve Governor Christopher Waller said Friday the time has come to begin lowering interest rates and he is open to larger rate cuts.

“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 in a speech at the University of Notre Dame in the state of Indiana.

“I believe the data we have received this week reinforces the view that there has been continued moderation in the labor market,” he added.

The US economy added 142,000 jobs in August, less than estimates of 164,000, according to figures released by the Labor Department. Job additions for July were also revised down 25,000, from 114,000 to 89,000.

Among a slowdown in inflation, the Fed has also been waiting for the labor market to cool before lowering interest rates.

“The collective set of economic data indicates to me that the labor market and the economy are performing in a solid manner and the prospects for continued growth and job creation are good, with inflation near 2%,” said Waller. “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. I was a big advocate of front-loading rate hikes when inflation accelerated in 2022, and I will be an advocate of front-loading rate cuts if that is appropriate,” he added.

As the manufacturing sector and labor market have been showing weaknesses in recent weeks, many analysts argued that the Fed’s tight monetary policy could still push the US economy into a recession.

The Fed governor, however, disagrees.

“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,” said Waller.

“While I don’t see the recent data pointing to a recession, I do see some downside risk to employment that I will be watching closely. But at this point, I believe there is substantial evidence that the economy retains the strength and momentum to keep growing, supported by an appropriate loosening of monetary policy,” he added.

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